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Marketing and Farm Credits 



A COLLECTION OF PAPERS READ AT 
THE THIRD ANNUAL SESSIONS OF 



The National Conference on Marketing 
and Farm Credits 



IN JOINT PROGRAM WITH 




The National Council of Farmers' 
Cooperative Associations 



IN CHICAGO 

AT THE HOTEL SHERMAN 

NOVEMBER 29-30 AND DECEMBER 1-2 

1915 



PRICE $1.00 






Marketing and Farm Credits 



A COLLECTION OF PAPERS READ AT 
THE THIRD ANNUAL SESSIONS OF 



The National Conference on Marketing 
and Farm Credits JJ-i- 



IN JOINT PROGRAM WITH 



The National Council of Farmers' 
Cooperative Associations 



IN CHICAGO 



AT THE HOTEL SHERMAN 
NOVEMBER 29-30 AND DECEMBER 1-2 

1915 



PRICE $L00 



,-\ 



COPTKIGIIT 101 r> 
AND 

Publishea by 

THE NATIONAL, CONFERENCE 

ox 

MARKETING AND FARM CREDITS 

Office of Secretary 
"Washington Building-, Madison. Wisconsin 



b 



'i 

'CU42S201 
MAR 21 19i6 



TABLE OF CONTENTS 

PREFATORY MATTER 

Page 

Title Page i 

Copyright ii 

Table of Contents iii 

Presiding Officers vii 

Officers National Conference viii 

Officers National Council ix 

Henry Wallace x 

Foreword xi 

PURPOSE AND SCOPE OF CONFERENCE 

Introduction 1 

Address of Welcome 

Harry B. Miller, Chicago 4 



ORGANIZING AGRICULTURAL COOPERATION 

Work of 1915 Meeting 

Chairman Frank L. McVey, Grand Forks, N. D 9 

The Next Step 

The Rt. Hon. Sir Horace Plunkett, K. C. V. O., Dublin, Ire- 
land 15 

The Kind America Needs 

Millard R. Myers, Chicago, 111 _ 2-5 

In Wisconsin 

Charles A. Lyman, Rhinelander, Wis 39 

The Business Side 

E. M. Tousley, Minneapolis, Minn 50 

Attitude of Railroads , 

R. W. Hockaday, St. Louis, Mo 56 

A Conservation Policy 

Gifford Pinchot, Milford, Penn 59 

Work Among Jewish Farmers 

George W. Simon, Chicago, 111 -- 63 

Relation to Trusts 

Samuel Untermyer, New York City 70 

Cooperation at Work 

William M. Stickney, Chicago, 111 84 



jv TAU 1,1-1 (M-' CONTENTS 

MAKKKTINO, THE FARM TKODUOT 

Page 

Economics oi- Ac<uici i ri la- 

Carl Scluirz Vroonmn. Wasliin.cton. P. C 101 

TuK N\'noN.\i, Pkoiukm 

Uoor.uo V. Hampton. NVasliin.mon. n. 107 

KiNciiON OK INhnin.KM.vN 

Pa\ id Friday. East Luusiiij;. Mich 113 

\V<n;K (M- livMio Dki'AKTMKNT 

\V. i;. Scholt:-. l^iisc. Idaho 123 

Skii.im; ri'Kisu viu I' I'koiu ns 

.1. \Y. Stroud. IJojiors. Ark 129 

S.\i>KS Tkouikms ok Ful U' (.^uowkus 

K. v.. Uauloy. Chicago. Ill l:>5 

^l.\UKK^l^(; Mhk in Nkw Enolanu 

>Vlllrid ^Vhoolor. Boston. Mass 141 

l^isnuiurioN ok Whoi.k INIuk in Ouic.voo 

W. J. Kittle. Chicago. Ill 152 

TlKMNO VOIATO L0S.>< INTO PUOKIT 

H. E. Horton. Chicago. Ill 158 

THE STANDARDIZATION OF FAKM FUODUCTS 

I.VOISI.ATIOX KlMJ SrANlVVUnr/ATlON 

Charles McCartli:*-. Madison. Wis 167 

MVKKKT OKAUKS and STA?!OAKnS 

Charles J. Brand. "Washington. l\ C 170 

CHKRSK PrOUIvKMS 

.1. B. McCrcady. riyniouth. Wis ISl 

Bi riKK BKom.K^is 

C. F. 1.00. :\ladison. Wis 1S5 

V^KAIN FKOUI KMS 

J. W. T. Ouval. Washington. O. C 191 

Tiun lu.vs OK Grain Insckctoks 

H. F:. Emerson. Minneapolis. :^linu 199 

WAUEHOVSIXO AND STANPABDIZATION OF FAKM FUODVCTS 

Sl'AlK WAKKHOI SINO ANO COTION 

Clarence Ousloy. College Station. Texas 209 

AOMINISTKATION OK TkXAS LaW 

l^>od W. Davis. Austin. Texas 21*; 

WOKK OF Fakmkks' Uxiox 

Joe E. Ednuiudson. Fort Worth. Texas 22t> 

WARKHOI SINO ANP FmCK OK COTIVN 

Ernest M. l.oeh. New Orleans. T.a 2? t 



TABLJi; OF CONTENTS V 

ELEVATORS— LOCAL AND TERMINAL 

Page 
Ai>\Ai\'i'A(!KS OK Statio-TjIOKnsic Systiom 

J. C. F. Merrill, Chicago, 111 245 

Farmkiis' Elevatou Movkmknt in United States 

Herman W. Danforth, Washington, 111 250 

Local Wakkhoit.se Pkoulems 

G. W. Lawrence, Larned, Kans 259 

A PitoDiKJEK's View ok Ratlkoads 

W. J. Ray, Colo, Iowa 260 

Banks and Local, Elevatous 

H. J. Farmer, Alrlie, Minn 268 

DiKKrCULTMOS OK STATE TeUMTNALS 

James E. Boyle, Grand Forks, N. D 26!) 

Problems of a Cooperative Terminal System 

J. M. Anderson, St. Paul, Minn • 283 

Canadian Terminal Fiohts 

Geo. F. Chipman, Winnipeg, Manitoba, Can 290 

RURAL CREDIT AIDS TO LAND PURCHASE 

Lessons kuom Ireland 

Charles W. Holman, Madison, Wis 301 

Needed Legislation 

Harris Weinstock, San Francisco, Cal 32 i 

Farmers' Needs on Reclamation Projects 

F. H. Newell, Urbana, 111 337 

Systeim Needed in West 

Elwood Mead, Berkeley, Cal 340 

Aids for Landless Men 

John Lee Coulter, Morgantown, W. Va 353 

PRESENT FACILITIES FOR LAND PURCHASE AND NEED OP 

LEGISLATION 

What Farm Mortciage Bankers Okfer 

F. W. Thompson, Chicago, 111 '. 363 

What Natioi^al Banks Are Doing 

B. F. Harris, Champaign, 111 376 

A Building and Loan Basis 

R. D. Kent, Passaic, N. J 380 

Opportunity ok Outside Capital in Texas 

James E. Ferguson, Austin, Texas 389 

Financing Farm Colonists 

Mrs. J. Haviland Lund, New York City 395 



vi TABLE OF CONTENTS 

FINANCING FARM BUSINESS 

Page 

!MHU)KST10NS KOK IjKCUSI^VTION 

Myron T. Herrick, Cleveland. Ohio 403 

Financing Amkiuoan I^vnh Ownfks 

David Lnbin, Rome, Italy 414 

PhOVIDINC, CkKUIT Dl'UlNO PKOmCTlON 

Carl W. Thompson, Washington, D. C 41S 

Landlord and Tenant in Production in North 

Charles S. Adkins. Bement. Ill 433 

Landlord and Tknant in Pkoih oiion in Soith 

Alexander E. Cance. Amherst, Mass 437 

Landlord and Tknant in Production and Markf.timj ok Cotton 

W. B. Yeary, Parmersvill, Tex 452 

Thk Tknant ok thk Noutu and Markktinc. ok Crops 

B. H. Hibbard. Madison, Wis 458 

The Tknant of thk South and Markktino, ok Crops 

Carl Williams. Oklahoma City, Okla 4*53 

Personal Crkdit ix>r Land Owning Farmers of the North 

Charles L. Stewart, Urbana, 111 ." 473 

Personal Crkdit kor Land Owninc, Farmkrs of thk South 

Lindley M. Keasbey. Austin. Tex 484 

INDUSTRIAL COOPERATION 

Work ok the Montcl^vu? CooPKUArivK Stork 

Emerson P. Harris, INlontoIair. N. J 497 

OFFICIAL BUSINESS 

1915 Report of Comjuttkk on Permanent Organization 504 

1915 Rki'ort of Comauttee on Resolutions 50i> 

1914 Report of Committke on Organization 511 

1914 Report ok Committee on Rksolittions 51 'i 

ACCREDITED DELEGATES TO 1915 CONFERENCE 515 



PRESIDING OFFICERS yii 



PRESIDING OFFICERS 



THIRD ANNUAL SESSIONS 

GENERAL MEETING — The Oreanization of Agricultural Cooperation, No- 
vember 29, 8 p. ni., Louis XVI Room. 

Frank L. McVby, chairman, The National Conference on Marketing- 
and Farm Credits; president, The University of North Dakota, Grand 
Forks. N. D. 

GENERAL MEETING — The Standardization of Farm Products, Novembei- 
30, 9:45 a. m., Louis XVI Room. 

Kenton L. Butterfield, president. The Massachusetts State College 
of Agriculture, Amherst, Mass. 

Sectional Meeting — The Warehousing and Standardization of Farm Prod- 
ucts, November 30, 2 p. m.. Crystal Room. 

Clarence Ouslet, director. Department of Extension and Home Eco- 
nomics, The Agricultural and Mechanical College of Texas, College Sta- 
tion, Texas. 

Sectional Meeting — Rural Credit Aids to Land Purchase, November 30, 2 
p. m., Louis XVI Room. 

John H. Worst, president. The North Dakota Agricultural College, 
Agricultural College, N. D. 

GENERAL MEETING — The Organization of Agricultural Cooperation, No- 
vember 30, 8 p. m., Louis XVI Room. 
Frank L. McVet. 

GENERAL MEETING — Rural Credit Aids to Land Purchase, December 1, 
9:30 a. m., Louis XVI Room. 

David Kinley, dean of the Graduate School, The University of Illi- 
nois, Urbana, 111. 

Sectional Meeting — Marketing the Farm Product, December 1, 1:30 p. m., 
Louis XVI Room. 

B. H. HiBBARD, professor of Rural Economics, College of Agriculture, 
The University of Wisconsin, Madison, Wis. 

Sectional Meeting — Present Rural Credit Facilities in Aid of Land Purchase, 
December 1, 2 p. m.. Crystal Room. 

John Lee Coulter, dean, College of Agriculture and Director Experi- 
ment Station, The University of West Virginia, Morgantown, W. Va. 

GENERAL MEETING — Financing Farm Business, December 2, 9 :15 a. m., 
Louis XVI Room. 
Frank L. McVey. 

Sectional Meeting — Standardization and Marketing of Farm Products, De- 
cember 2, 1:30 p. m., Louis XVI Room. 

Herman W. Danforth, president. The National Council of Farmers' 
Cooperative Associations, Washington, 111. 

Sectional Meeting — Financing Farm Business, December 2, 1 :30 p. m., Crys- 
tal Room. 

James C. C.\ldwell, president, The First National Bank, Lakefield, 
Minn. 

Sectional Meeting — Standardization and Marketing of Farm Products, De- 
cember 2, 8 p. m., Louis XVI Room. 

MILL.A.RD R. Mi'ERS, editoi-, The American Cooperative Journal, Chi- 
cago, 111. 

BUSINESS MEETINGS — 
Frank L. McVey. 



viii GENERAL COiMMITTEEMEN 

GENERAL COMMITTEEMEN 

The National Conference on Marketing and Farm Credits 

Frank L. INIcVey, Grand Forks, N. D., cliairman, president University 
of North Dakota. 

Charles McCarthy, Madison, Wis., treasurer, chief Legislative Reference 
Library. 

Millard R. IMyers, Chicago, 111., assistant treasurer, editor American 
Cooperative Journal. 

Charles W. Holman, Madison, Wis., secretary National Conference on 
ftlarketing and Farm Credits. 

C. A. Lyman, Rhinelander, Wis., assistant secretary (by appointment), 
chairman Legislative Committee, Wisconsin Society of Equity. 

Frank P. Holland, Dallas, Texas, publisher Farm and Ranch and Hol- 
land's Magazine. 

Henry Wallace. Des IMoines, Iowa, publisher Wallace's Farmer.* 

John Lee Coulter, Morgantown. W. Va., dean of State Agricultural 
College, director Agricultural Experiment Station. 

Charles S. Barrett, Union City, Ga., president Farmers' Educational and 
Cooperative Union of America. 

Gifford Pinchot. Milford, Pa. 

L. D. H. Weld, New Haven, ^Conn., professor of business administration, 
Yale University. 

Lou D. Sweet, Carbondale, Colo., potato farmer. 

Herbert Quick, Berkeley Springs, W. Va., The Curtis Publications. 

E. P. Harris, INIontclair, N. J., president Montclair Cooperative Society. 

E. M. Tousley, Minneapolis, Minn. 

H. C. Sampson, Spokane, Wash., former secretary of the Northwestern 
Fruit Distributors. 

Clarence Poe, Raleigh, N. C, president Progressive Farmer Pub. Co. 

James C. Caldwell, Lakefield, Minn., president First National Bank of 
Lakefield, Farmer and Coiiperator. 

W. L. Ames, Oregon, Wis., president National Farmers' Congress. 

H. J. Hughes, Minneapolis, Minn., editor Farm, Stock and Home. 

H. J. Waters, Manhattan. Kans., pres. Kansas State Agricultural Col. 

Clarence A. Shamel, St. Joseph, Mo., editor The Profitable Farmer. 

H. E. Young, Chicago, member Executive Com. 111., Farmers' Institutes. 

L. S. Herron, Lincoln, Neb., editor Nebraska Farmer. 

Frank E. Long. Chicago, 111., publisher The Farmers' Review and the 
Stockman and Farmer of Pittsburgh, Pa. 

E. T. Meredith, Des Moines. Iowa, publisher Successful Farming. 

Thomas Cooper, Fargo, N. D., director N. D. Agr. Experiment Station. 

J. M. Caffrey, Franklin, La., sugar planter. 

George W. Simon. Chicago, 111.. Western Agent The Jewish Agricul- 
tural and Industrial Aid Society. 

H. W. Danforth. Washington. 111., president National Council of Farm- 
ers' Cooperative Associations. 

Arthur Capper, Topeka. Kans., president Capper Farm Journals, Gov- 
ernor of Kansas. 

* Deceased. 



OFFICERS .NATIONAL COUNCIL ix 

GENERAL AND STATE OFFICERS 

The National Council of Farmers' Cooperative Associations 

H. W. Danforth, Washington, III., president National Council. 

W. J. Ray, Colo, Iowa, secretary Farmers' Grain Dealers' Association of 
Iowa. 

J. W. Shorthill, York, Neb., secretary Farmers' Grain Dealers' Associa- 
tion of Nebraska. 

A. N. Steinhart, Bloomington, 111., secretary Farmers' Grain Dealers' 
Association of Illinois. 

H. J. Farmer, Airlie, Minn., secretary Farmers' Grain Dealers' Associa- 
tion of Minnesota. 

A. A. Lane, Sherwood, N. D., secretary Farmers' Grain Dealers' Associa- 
tion of North Dakota. 

J. T. Belk, Henry, S. D., secretary Farmers' Grain Dealers' Association of 
South Dakota. 

G. W. Lawrence, Larned, Kas., secretary Farmers' Grain Dealers' Asso- 
ciation of Kansas. 



1^0 tfje illtmorp 

of our faittful ^ommtttrtman anb 

(So tDorkrr in tt)e abUancement 

of ^mrrtcan Agriculture 

ilenrp OTallace 

IBovn Maxtf) 19. XSZO 
;©ifti Jfeliruarp 22. 1916 



il^f toasi a farabe pionet r toijo bla5fb a trail to 
make easiier ttje lot of tfje glmerican fanner 



FOREWORD 

IN PRESENTING THIS VOLUME TO THE PUBLIC the 
committee believes that a new note has been sounded in the litera- 
ture of agricultural economics. In the three years of its existence 
the National Conference on Marketing and Farm Credits has interpreted 
the changing thought of Agricultural America. That thought, in those 
three years, has progressed from the individualistic viewpoint to the so- 
cial concept. 

This volume, perhaps, more clearly than any other current contribu- 
tion, voices the demand for cooperation among farmers in the sale of 
their produce and the purchase of their supplies, and advances the theory 
of state aid to farmers in the purchase of their farms. It was notable 
that the dominant thought of the last Conference centered on this need 
for the creation by the federal and state governments of a broad land 
policy. If the Conference discussions be any index of the public mind, 
the time is not far from us when America will grapple with the land 
question as a social issue, just as from the discussions of cooperation at 
this Conference, has sprung an agency whose purpose is the proper train- 
ing of the American farmer for self-help in his business operations. 

The committee regrets that it was not possible to print the discussions 
of the papers, but it has made arrangements whereby some of the dis- 
cussions will be given to the public in the near future. It has been 
able to present in this book a few of the addresses delivered at the Sec- 
ond National Conference on Marketing and Farm Credits, as well as 
those that helped make the Third Conference and epoch marker in 
agrarian history. 



MARKETING AND FARM CREDITS 



The third National Conference on Marketing and Farm Credits 
was held in Chicago, 111., November 29-30, and December 1-2, 
1915, at the Hotel Sherman. The opening session began the even- 
ing of November 29 with Chairman Frank L. McVey presiding. 
At the roll call of states 42 were reported present at this session. 

What, who and why was this Conference, and as there had 
been two prior conferences, why a third one? 

The National Conference on Marketing and Farm Credits is 
an organization formed for the purpose of launching a move- 
ment to organize the agricultural interests of America for prac- 
tical work. "Better Business, Better Farming and Better Liv- 
ing," is the slogan. Elimination of the waste in marketing 
which now constitutes one of the largest factors in the cost of 
living and which also constitutes one of the most discouraging 
features of farm life is a prime purpose. 

To the men who are giving time and money to aid this move- 
ment, the term waste applies to every phase of production and 
distribution, from wasted effort on the farms, waste in the form 
of unmarketed products and waste resulting from inadequate 
banking accommodations for farm operators to the waste due to 
faulty packing and lack of standardization and the waste that 
occurs in transporting the products to market. 

And to these men the organizing of the agricultural interests 
of the country means the building up of the machinery necessary 
to eliminate or reduce waste of every kind. However, they do 
not purpose to take a leap in the dark. The have the experience 
of many European countries to guide them. They believe that 
what Germany, England, Scotland and Ireland have done, Amer- 
ica can do. They also believe that wihat these countries have 
found it necessary to do, America will find it necessary to do — 
if the farmers of this country are to be able to compete with the 
farmers of Europr I 

European countries have organized their agriculture and all 
the activities incident to th " andling of foodstuffs with dispatch 



2 MARKETING AN1> FARM CRKDITS 

and yi>l without wasto. boi'ausc the war has foivod this step upon 
thoiu. Makiui? tho food supply moot tlio donuuuls, without oall- 
iug upou tiho rest of tho world I'or any oousidorablo quantity of 
oithor noooss{U"ios or oon\ forts, is a task to which Uorniau states- 
men, ooonomists and si'iontists have bent themselves with re- 
markable energy and amazintr sueeess. England, less dependent 
upon luMue ]n-oduetion, was late to see the importanee of this 
program, but by reason of eireunistanees has been foreed to 
adopt similar measures. 

Germany Has Mobilized Ag-riciilture 

(.un-nuiny not only is utili/ing every sqviare foot of ground 
available for agrieulture, but, through eoop^M-ativo methods, is 
assendiling and distributing agrieultural products with eeonomy 
and dispate:h, not alone to the army but to the eivilian popula- 
tion as well, (ireat Britain, after having permitted the deoad- 
enee of this fundamental industry through a long period of 
years, now is rapidly regenerating the ugrienlture of Ireland, 
8eotlaiui and England, largely through cooperative methods 
whieh by eneouraging standardi/atiou of products nudvos eco- 
nomical and more convenient marketing possible. 

Tho end of the present world war will tind all Europe ofK- 
ciently organized for the production and distribution of food 
stutYs. Tho stern necessities of tlie nations engaged in war gave 
a groat impetus to this movement, and tho success with which 
the governments have boon able to make use of tho cooperative 
societies in assembling products o( the grade aiul quality re- 
qnired for tho army has constituted a practical denuMistration 
of the value of cooperation. The new methods, with their sav- 
ings of effort and money and with their ofticioncy and conven- 
iences, have come to stay. This et^cieucy acipiirod in time of 
war will remain when peace is restored. 

Tho .\morican farmer must be ready for this new order, else lie 
will bo at a disadvantage. With a few exceptions .An\erica has 
developed no marketing system worthy of the name. Agric\dture 
is almost unorganized, and marketing is still on the old basis 
wheiv waste exacts a tremendous toll. 

To prepare tho American farmer for the now order is the one 
groat object of the National ronforence on Marketing and Farm 
Credits. 



ORGANIZING COOPERATION 



3 



The Conference of 1915 did moi'e than disenss conditions. It 
considered how to do things more than what to do, and it 
discovered a way of doing them. 

The leaders in this movement are economists, bankers and head- 
ing farmers representative of every section of the United States. 
Among them are presidents of state universities and agricultural 
colleges, leaders in agricultural societies and well-known students 
of various phases of the problem of production and distribution. 

How to organize tlie agriculture of America was the great probn 
lem that came before the Conference this year. At the twoi 
previous conferences there was much discussion of what to do; 
At this, the third conference, attention was centered on how to 
do the things that all are agreed must be done. 

And from the Conference sprang an organization movement 
with a national headquarters, employing a corps of experts to 
be at the service of affiliating organizations, and to form coopera- 
tive societies in eomnuniities that need the service. 



MARKETING AND FARM CREDITS 



ADDRESS OF WELCOME 

IIaRKY B. MlULER 

Prosecutor for the City of Chicago 

First of all I desire to extend to the eluurmaii and to the dele- 
gates to this most important Conference, tilie sineei*e regrets of his 
liouor. tlie mayor, at not being- able to be here in person tonight. 
Those of you that are aequaiuted with the business of the city of 
Chicago know that right at this moment he is presiding over a 
rather turbulent council, and this matter is of so much import- 
iince that he thought it was utterly impossible for hiui to leave 
to come here. He wishes me, however, to express to you his most 
hearty, sincere Avelcome to the City of Chicago, and his fail- 
ui*e to appear lieiv in pei^son tonight will not in any way con- 
vey to you his lack of appreciation in your selecting the City of 
Chicago this time for your conference, or in his earnestness in ex- 
tending to you this welcome on behalf of the citizens of the City 
of Chicago. 

I siiid that we welcomed to the city this most important Con- 
ference, and I use those words "most important, " realizing just 
exactly what they mean and what they convey. T think, ladies 
and gentlemen, that a conference or convention of tliis nature is 
second to none in importance to any body of men and women that 
could possibly meet in a convention hall for the purpose of trans- 
acting business. AVe of the City of Chicago, the mayor and the 
people of this great city, feel honored that you have selected the 
City of Chicago this year as the place for holding this import^iut 
meeting. 

Chicago is a great and honorable city. It is the nmrketing 
place for all commodities; it is the central city of the United 
States. Here it is that the farmers send their grain;. here it is 
that the products of the soil throughout the entire western and 
northern and southern countries come from the farmei*s. Here 
it is where we mainifacture and sell back to you the things that 
yon need in getting the fruits from the ground and sliipping them 
heiv, and I think it is very appropriate and very benetiting in- 
deed that you have selected this great central market, the City of 
Chicago, as the place where you sliould deliberate over matters 
vof the most importance to the people of this country". 



HARRY B. MILLER 5, 

I know very little of the business that will come before your 
convention. I never had the honor of living upon a farm, and I 
lack that great distinction of being born on a farm; but still I 
realize to a certain degree and to a certain extent, perhaps not sO' 
much as you ladies and gentlemen do, the importance of the farm- 
ing interests of the United States. When we think that today 
the United States of America has a bumper crop, when I under- 
stand that the crop of 1915 exceeds that of any year for a number 
of years past, and then on the other hand see that the cost of liv- 
ing is so high, and that the people that consume this, the great 
consumers of the United States, with that great bountiful crop, 
are paying an exorbitant price for the necessities of life, this 
question, and I am sure it is a question which to a large extent 
will come before this convention, is one of the most vital questions 
of the day. You, ladies and gentlemen, who understand these 
things, have met here for the purpose of finding out why it is 
that this condition exists. And we are glad that you have come 
to this city, because we believe that here it is where you will find 
cooperation on the part of the officials and the citizens of this city. 
Here it is where you will find help on all sides to help you de- 
liberate and solve these great problems which you will be con- 
fronted with during the course of your convention. 

It is the desire of the mayor of this city and of the people of 
the City of Chicago, that your sojourn in our midst will be very 
pleasant to you, that the days you spend here may be a source 
of enjoyment, and may bring joy to you, and that the citizens of 
this city may treat you with such courtesy as it due you, so that 
when you leave the City of Chicago after your convention, that 
you will realize that you have the best wishes and best respects 
of the people of this city. 

I was very gratified, Mr. Chairman, when you read the lists of 
states to find that, according to my figures, there are only 6 states 
so far in which there is no delegate in this meeting. I think this 
is a wonderful gathering. I think that the people of the United 
States, the real produeei's of the United States, are represented 
in this gathering tonight, and I am glad as I am sure every citi- 
zen is glad that the real producers of the country, the men and 
the women that really give to the city population the necessities 
of life, have thought enough of the consumers to get together in a 
convention and to come from the 4 corners of this great country,, 
from places in many cases where it took you a day or more, and 
leaving your places of business and your homes for the one pur- 



j6 marketing and farm credits 

pose, for the doing of what? Of devising Avays and means 
whereby the great Auieriean piiblie through your deliberations 
and through your considerations and solving of these great prob- 
lems nuiy get the greatest satisfaction and the greatest happiness 
out of life. 

And we do indeed wish you God-speed in the great things that 
you will have before you in this convention. We know that 
what you do will only redound to the best interests and the benefit 
of the great public of this country. And therefore around your 
convention table in this convention hall, it is our sincere desire 
«nd wish that you may come to the conclusion, in a great many 
problems, which will bring the best results to the consumer of 
this country. 



ORGANIZING AGRICULTURAL 
COOPERATION 



THE WORK OF THE 1915 MEETING 

Chairman Frank L. McVey 
President of the University of North Dakota 

Every meeting makes a record of some kind, and it is the duty 
of the chairman to project the ideal of the meeting- in a clarion 
note. If he is not in harmony with the general purpose of those 
who attend, he cannot expect to do more than make discordant 
sounds for the listening world. Sometimes the chairman is so 
latitudinarian in his viewpoint that he touches all the keys and 
stops with a resultant sound so vast in volume that no specific 
note rings out clearly above the noise. In my capacity as chair- 
man of this Conference, I shall try to give evidence of such musi- 
cal capacity that the note of the opening speech may clearly indi- 
cate the purpose of the Conference. That note to express it in 
one word is cooperation, but a cooperation with the definite pur- 
pose of securing results in the marketing of farm crops and 
financing of farm operations. 

Agriculture and its needs are in the fore front of public discus- 
sion. "While it does not exactly share a place with the news of the 
war upon the front pages of our dailies, yet it does find a promi- 
nent place on the next page. Stupendous figures are printed every 
now and then of its vast importance. We are told that of the 
wealth produced in a given year, agriculture was to be credited 
for $9,000,000,000. Another feature of importance of this great 
occupation is that 36 per cent of the population is engaged in it 
or is supported by it. Despite this vast showing, agriculture, 
taken as a whole in this country, has not prospered. Here and 
there are exceptions to this statement despite the many activities 
ties that work to energize it and place it on a higher plane of 
operation. 

It is agreed that there must be changes and now it is pretty 
clear that the general features of these changes may be centered 
about three things : (1) better agriculture, (2) better markets 
and (3) better financing. The first of these, better agriculture, 
is fairly well taken care of through the work of the depart- 
ment of agriculture, in the activities of the many farming asso- 
ciations in the different states and by the training afforded in 
the schools and colleges of the country. But, it has been clearly 



10 MARKETING AND FARM CREDITS 

shown that better agriculture depends upon an adequate system 
of tinanee. The fact of the matter is that the markets and the 
financing of agriculture remain about as they have been for the 
past quarter of a century. Improvements, of course, have taken 
place in the quicker transportation of products and in prompter 
financial service. Yet these have not touched the real problem. 
The farmer is still compelled to rely upon the market machinery, 
with which he has had little or nothing to do in the matter of its 
organization, to take the product to the consumer. Here and 
there standards of products have been worked out, but generally 
speaking, there are but few standards for the marketing of farm 
products. Disputes, misunderstandings and bad feeling natur- 
ally arise as a consequence. The problem of marketing, therefore 
not only includes the proper standardizing of the product and the 
placing of it in satisfactory carriers and containers, but it has 
to do with the transportation, the display in cities, the sale of the 
product and the accounting for moneys received as well. The 
railroads and terminal elevators have made advances in better 
handling facilities ; but the system of display of products is inade- 
quate and the farmer is constantly subjected to heavy charges 
of service for sale as the product moves on to the consinner. 

Bridging the Gap Between Farmers and Consumers 

Between the farmer and the consumer there is a great commer- 
vcial and financial gap. In the mercantile world this gap between 
the producer and the consumer is being bridged rapidly by the 
establishment of the necessary machinery of branches and agents. 
But, the fanner is playing the game alone and finds it increas- 
ingly difficult to protect himself against his own ignorance and 
ills isolation in the coimnercial world. 

The great industrial organizations have learned that coopera- 
tion between their different parts are absolutely necessary to their 
success. Thus, the producers of iron ore are organized for the 
transportation, smelting, manufacture and sale of their product 
to the consumer. ]Many other industries have foimd it neces- 
sary to do the same thing. Necessarily, agriculture with its many 
individual producers, occupies a very different position, but the 
dift'erence is not so great that the farmers cannot as a gi-oup profit 
by the lesson taught by the experience of these great industrial 
organizations. In foreign lands this has been done. One has 
but to point to the organization of agricultural activities in Den- 



FRANK L. McVEY n 

Tnark, Germany, France and Ireland to bring witness to the truth 
of this statement. It therefore is important that the farmer 
should come to a larger appreciation of the necessity of coopera- 
tion between the agricultural groups. Nor should political views 
be allowed to interfere in his attitude. It is not a qustion of 
socialism or individualism, of democracy or republicanism ; it is 
a question of efficiency and social betterment. 

Working- Out a National Org-anization Policy- 
Accepting such lessons as have been taught in the old world, 
the time for serious consideration of the whole problem is at 
hand. Agricultural difficulties are so far-reaching in their social 
effects that they must be worked at in a new light. It is time for 
a great agricultural society on a national basis to study and form- 
ulate the principles for the expansion of the nation's greatest 
business. How can individual farmers work with their neigh- 
bors ? How can neighborhood groups work with other groups of 
a similar character? The confusion of the present cannot con- 
tinue. This necessity of mutual understanding is not simply one 
confined alone to the agricultural group, but it has a far wider 
application as shown in the experience of England and France in 
the present war. The organization of agricultural groups under 
cooperative systems would mean a more adequate and systematic 
supply of food products in times of distress. Such an organiza- 
tion, hoAvever, will have the good will of all so long as it deals in 
generalities about the existing situation. But so soon as it may 
agitate for changes in the economic methods of distribution it 
will have the hostility of some of the adherents of present meth- 
ods. It, however, must be taken for granted that any change 
likely to modify situations will find obstacles in its path. 

There is still a third element in this problem to be considered. 
' ' Financing the Farmer ' ' has been discussed by everybody nearly 
everj'where. Many suggestions have been made as to methods, 
but only a few feeble steps have been taken. Without question, 
no great industry can progress unless it has an adequate system of 
finance. The commercial world long learned this and the farmer 
must come into a clearer appreciation of its meaning. As yet, 
no plan has been attempted and no details have been made clear. 
It is now time that both be done. It will, therefore, be seen that 
a great problem of vast extent and an enormous difficulty exists 
in the marketing and financing of agriculture. 



12 MARKETING AND FARM CREDITS 



What the First Conference Did 

It was this vast problem that was in the minds of those who* 
called the first National Conference on Marketing and Farm 
Credits. The first one was held in Chicago in April, 1913. The 
program was given over to the discussion of the general phases 
of marketing and financing of farm credits. It was the hope of 
those who called the Conference that by common council with 
each other, light might be thrown upon the ways of relieving some 
of the defects of the present methods of marketing farm products 
and financing farm business. The call for the Conference was 
generously accepted. The delegates were really laying a new 
trail in the economic woods of modem industry. In reality the 
purpose of the Conference was to bring about a readjustment of 
the farming population to harmonious relations with the indus- 
trial world. 

The first program dealt with the various aids to agriculture. 
After emphasizing the wastes in distribution, the sessions dis- 
cussed the existing types of organization and what they had done 
in their relation to markets and financing the farmer here and 
there. The last two sessions were given over to discussions of f aimi 
credit systems in vogue in different lands. Three years have 
passed since that meeting. It is difficult, however, to measure the 
work of that Conference. The inspiration given it by the chair- 
man, Colonel Frank P. Holland of Texas, assisted materially in 
its success. The idea of the first Conference was kept alive by 
the secretary of the Conference, Mr. Charles W. Holman, Dr. 
Charles McCarthy of Madison, Wisconsin, the interested coopera- 
tion of the farm papers of the country, and many individuals 
scattered through the land. Freedom of speech was maintained 
throughout and it was clearly demonstrated that there was a 
great interest in an important national problem. 

Cooperation Keynote of Second Conference 

Almost exactly a year later the second Conference was called.. 
Its keynote was ''Cooperation and the Need of Careful Considera- 
tion of the Eeports of the American Agricultural Commission,'^ 
which was then presenting the result of its studies in Europe to 
Congress for consideration. 

The outcome of this Conference was definite ajnd clear in the 
recommendation that a third Conference be called, a survey be 



FRANK L.. McVEY I3 

taken of the cooperative agencies and an exhibit of containers be 
organized as the concrete features of the Conference. It is unfor- 
tunate that 2 of these suggestions have not been carried out. 
The declaration of war in August, 1914, with its accompanying 
demoralizing of financial matters, together with the absence of 
the secretary in Europe, as a special investigator for the federal 
^oveimment dn the spring of 1915, prevented the financing and 
staging of the exhibit. The survey that was to be undertaken 
was much more extensive than appeared at the time of the Con- 
ference. Moreover, the lack of funds and the removal of the 
chairman of the committee, Professor L. D. H. Weld, to New 
Haven interfered seriously with the plans. 

Scope of 1915 Conference 

The program of this year, however, is so much wider and ex- 
tensive in its study of the situation, than in any previous year, 
that the disappointment and the failure j;o bring results in the 
two features just mentioned may be offset in its organization. 
The experience of the past 2 Conferences has much influenced 
'^its form and content. One of the things learned in the previous 
years was the extent and varied industrial conditions existing in 
the United States. It is a big country that we live in/ and what 
is true or what is needed in one part is not necessarily true or 
necessarily needed in another part. Moreover, it has been 
learned that there are more than one general class of farmers 
interested in these problems. Trite as this statement may be, 
nevertheless most of the discussions oi the past 10 years have 
taken it for granted that there was only one general class to be 
considered. Starting with these two simple propositions, the 
program has been built up. Thus, the two great topics of the 
meeting are "Standardization of Products" and "The Financing 
of Farm Business. ' ' The keynote is set in this, the first meeting, 
and then follow the three general meetings on ' ' Standardization 
of FaiTti Products" and the other two upon "The Financing of 
Farm Business. ' ' This is not all. In the analysis of the prob- 
lem, standardization of the great staples necessitates many meth- 
ods just as the problems of finance must include the needs of the 
men with land, the tenant of good standing and the landless man. 

Having thus set the discussion in the general meeting these 
topics are taken up specifically and in more detail in the section 
meetings, so as to emphasize the needs of the different parts of 
the country. 



14 MARKETING AND FARM CREDITS 



Reaching to the Heart of American Life 

I cannot bnt assert that it is a great program that has been pre- 
pared for this Conference. It is full of real stuff that touches the 
problems of agriculture, and the Conference may well count itself 
fortunate in the many notable speakers who are present and in 
particular in the two distinguished gentlemen who have come far 
to give us the advantage of their wisdom and experience. In; 
Sir Horace Plunkett, we have the enthusiasm of the leader of a 
great cooperative movement in Ireland, and Mr. David Lubin,. 
the United States delegate to the International Institute of Agri- 
culture at Rome, brings us the interest of a prophet and the ex- 
perience of a wise man in the held of agricultural credit. Added, 
to these are others from many parts of the land. Delegates, too, 
have come from many walks of life. All of these come in the- 
spirit of helpfulness and determination to make this Conference 
successful in establishing a real beginning point in a New Agricul- 
ture. The union of the National Council of Farmers' Coopera- 
tive Associations with this Conference has added a new emphasis 
to the spirit of cooperation, which must be one of the great lessons 
of this meeting. 

In the final analysis, no one is going to solve the farmer 's prob- 
lem for him. He must do that for himself. Nor will he solve the 
great problem of marketing and farm credits by his clannish at- 
titude of class spirit. The problems are fundamentally economie 
and must be based upon sound principles of business and finance. 
Hence cooperation becomes the keynote, working as it does for re- 
sults in the standardization of products, and in the hopes for a 
system of finance that will do for farm business what the banks 
have done for commercial enterprises. 

The Beginning of a New Era 

Looking back at the results of this Conference after the f>assage 
of a quarter of a century, I think it will be possible for those of 
lis who are alive at that time to set it down as the beginning of 
new things. It will be more and more apparent as the 25 years 
grow to a close that we must rely upon the intelligence, wisdom 
and justice of men themselves to bring results in the New Agri- 
culture. The honor guest of this evening can look back to the 
beginning of cooperation in the land of his fathers. He can see 
Avhere the foundation Avas laid down and we in this meeting of 



SIR HORACE PLUNKETT I5, 

1915 will catch anew the spirit of cooperation when we clearly 
apprehend its importance to the welfare of the nation. 

If all goes well, 25 years ought to see vast changes for the 
better. Agriculture financed on a business basis, marketing 
carried on to the advantage of bettering the producer and con- 
summer, economic waste reduced materially and all men open to 
wider opportunity and better conditions of welfare. So begins 
the Conference of 1915. To it I welcome you. Over it hovers 
the angel of freedom of speech and through it permeates the 
blessed spirit of fairness, justice and wisdom. 



THE NEXT STEP IN THE ORGANIZATION 
OF AGRICULTURE 

The Rt. Hon. Sir Horace Plunkett, K. C. V. 0. 

Founder and President The Irish Agricultural Organization Society; 

Former Minister the Department of Agriculture and 

Technical Instruction for Ireland, Dublin, Ireland 

TJie question upon which I have the honor to address you is 
one I have studied in its bearings upon your country and upon 
my own for six and thirty years. For the first 10 years of this 
period I was engaged in ranching and farming in Wyoming and 
Nebraska. I have continued to make an annual visit to those 
happy hunting grounds of my less serious days. During the 
quarter of a century which has since elapsed, my chief work — 
indeed my life's work — has been the organization of agriculture 
in the little island to which I belong, 4,000 miles away from the 
scene of your Conference. That work included 7 years dur- 
ing which I was the minister responsible for setting to work the 
Department of Agriculture and Technical Instruction of Ire- 
land, in the creation of which I had some share. But it is as an 
organizer of voluntary effort among farmers that I gained most 
of the experience which justifies me in taking part in your de- 
liberations. 

How Urban Thougfht May Menace Country Life 

This Irish- American experience induced me, an unhyphenated 
Irishman, to write dn 1910 a series of articles for The Outlook 
which were subsequently enlarged into a little book and pub- 



16 MARKETING AND FARM CREDITS 

lished mider the title. The Rural Life Pi-obleui of the United 
States. To this work I venture to refer those who may eare for 
a fuller statement of my opinions than is possible "wdthiu the 
limits of this address. In it I traced the origin of the problem 
to the industrial revolution, which began at the end of the eigh- 
teenth ceutuiy in England. There the idea grew that the politi- 
cal and economic strength of countries depended alike on indus- 
trial development at home and commercial expansion abroad. 
This economic theory, which was probably true at the time in 
England, on account of her insular position, spread throughout 
the English-speaking world, where it has ever since led to the 
decline, mostly in luimbers but always in national position, of 
the agricultural populations and their industry. 

The city had been developed to the neglect of the country- and 
our civilization had thus become dangerously one-sided. 

I argued that in the interests of national well-being, it was 
high time for steps to be taken to counteract the townward which 
in some respects is becoming a downward tendency. I sketched 
a scheme of rural reconstruction which was being worked out in 
Ireland, where the solution of the problem of rural backwardness 
was found to lie in the reorganization of the farmer's industry 
and business upon cooperative lines ; and I described and recom- 
mended for adoption in the United States a new agency of social 
service, specially invented for the pui^pose in view, called th^ 
Agricultural Organization Society. 

The proposal may have been premature, but, in the last 5 
yeai*s, thought upon the rural problem in the United States has 
advanced rapidly. When I ^\Tote, the conservation and country 
life policies of the second Roosevelt administration had given the 
first big impulse to the new agricultural thought. A good il- 
lustration of new interest in the farming indnstiy was afforded 
by the appearance of rural credits as a prominent plank in the 
platfonn of the three parties in the presidential election of 1912. 
I am afraid it was a case of window-dressing, if I may use an old- 
oountr^' political metaphor. In the following year the American 
Agricultural Commission toured Europe in search of informa- 
tion on coopei-ative organization and rural credits. I may note 
in passing that they spent in Ireland the greater part of the 
time allotted to the British Isles, and their report shows that the 
agricultural organization movement there had made a consider- 
able impression upon this veiy representative body of agrieul- 



SIR HORACE PLUNKETT 17 

tural inquirers. But it is to the National Conference on Market- 
ing and Farm Credits that I look to give large practical effect to 
a rapidly advancing movement of thought which is demanding 
a solution for the problem of rural life in the United States. 

This estimate of the importance of the Conference is not an 
empty compliment in order to ingratiate myself with you. Your 
program (which in the form it has reached me was only provi- 
sional but will I presume be substantially adhered to) opens 
with a discussion of cooperative legislation. Then, after a de- 
scription of the work before the Conference by its chairman, 
the discussion centers upon the organisation of agriculture it 
being left to me to suggest the next step to be taken m the fur- 
therance of that object in America. 

I take it, as an indication of what is expected of me, that the 
next speaker at the first meeting, Mr. Millard R. Myers, a well- 
known student and organizer of agricultural cooperation, is to 
review the successes and failures of the American movement. 
The three following days are to be occupied in discussing a wide 
range of practical subjects, every one of which appears to me, 
as an old student of and worker upon agricultural problems, to 
be of real importance. But similar programs (though, I admit, 
never, from my point of view, quite so comprehensive or well ar- 
ranged) I have seen before, and in some cases, though not many, 
the practical conclusions arrived at have adumbrated a large 
advance in American agriculture. In no case have the practical 
results been commensurate with the excellent advice which has 
been given to farmers. 

Hour Strikes for Reorganisation of Agriculture 

I, of course, stand for a complete reorganization of agriculture 
upon cooperative lines and in theory I do not find any dissent 
from this view of the farmer's chief need. Yet I doubt whether 
it would be possible to prove that one per cent of the agricultural 
business of the United States was transacted by genuinely co- 
operative associations of farmers. This fact does not discourage 
me in the least. The time was not ripe until now for the first 
big movement in the desired direction. We may find that the 
next step in the organization of agriculture, which to me is the 
first really effective step cannot yet be successfully taken, but 
personally I am quite sanguine, from what I have learned from 
my American friends who are working in the same field with me 

2 — M. F. C. 



18 MARKETING AND FARM CREDITS 

for rural progress, that, with the assembling of your third an- 
nual congress, the hour has struck. 

My reason for this opinion is so largely a matter of instinct 
bom of experience that even a much fuller argument in support 
of it than time would permit would be inadequate. I am pro- 
foundly convinced that the slow progress which has been made 
in bringing your agriculture into line with an urban ci'vilization, 
which the great Republic of the West has achieved, is due to 
the tendency of all the English-speaking countries to apply ur- 
ban principles and urban methods to rural conditions. I could 
illustrate my meaning by a survey of the organization of agri- 
culture in the many parts of the United States where I know it 
by reading or personal observation. I find, in every kind of 
associated action by farmers, that, in most cases, the organiza- 
tion is on the recognized corporation plan. It is frequently 
called cooperative, but, even if some of the cooperative forms 
are observed, the spirit is lacking. In many cases, cooperative 
laws have been demanded and conceded but the bold Roman 
hand of the city lawyer is more evident than the horny hand of 
the tiller of the soil. Not long ago I was sent a copy of the 
Clayton Anti-Trust Act, Clause 6, which purported to give to 
cooperative associations of farmers immunity from the penalties 
inflicted upon '^combinations in restraint of trade". The clause 
was so drafted that any cooperative organizer could have told 
the legal luminary responsible for its terms that it would be in- 
operative. 

Misusing Term Cooperation 

Then again, the use of the word "cooperative" in the United 
States — and here I am afraid the department of agriculture is 
not without blame — has gone a long way to substitute bogus for 
real cooperation. But these aspects of the question must not be 
treated by me or I shall be trespassing not only on your time 
but on the province of other better informed and more competent 
authorities who are to address you. The one point I desire to 
emphasize is that all the splendid work which ds being done by 
farmers and for farmers to try and organize their industry so 
as to give it its proper place in the national economy must fail 
of its full purpose until cooperation — the vital principle of rural 
progress — is firmly established in the working lives of your rural 
communities. To all who have not labored in this field of social 
endeavor the difference between true and false cooperation seems 



SIR HORACE PLUNKETT 19 

fanciful, theoretical and unimportant. Those who have so 
worked will know that never could it be more truly said : 

"Oh the little more and how much it is 
And the little less and what worlds away." 

What Was Done in Ireland 

I have been asked — and the request is in harmony with the 
intensely practical character of your program — that I should 
base any constructive proposals I have to make upon actual ex- 
perience gained in dealing with the rural life problem of Ire- 
land. In this way I can undoubtedly make my best contribu- 
tion to the thought of the Conference, but I must preface this 
part of my exposition with two observations. 

The Irish movement is the creation not of what the world 
calls practical men but of idealists. In the affairs of life it is 
always coming home to us that ideas are the most practical 
things in the world, and it is sober fact that the principles of 
agricultural development which underlie this work in Ireland 
ow e not only their theoretic acceptance but also their application 
to the farmer's industry to poets, writers of plays and students 
of philosophy and sociology as well as of economics. It needed 
these thinkers to see wherein the agricultural mind had failed 
to grasp its subordination to tjie mind of the city. It was these 
men who, desiring to render to the practical life of their country 
the services most needed in the circumstances of the time, dis- 
covered not only the fundamental principle of rural progress, 
which has now been embodied in a definite agricultural policy, 
but who also discovered a new working method and who de- 
signed a complete machinery for giving operative effect to that 
principle. And it is not only in the large grasp of situations 
arid in the establishment of guiding principles that the men of 
vision come down to business. It was a poet and an artist who 
first impressed upon the Irish farmers that they were the most 
important of the nation's manufacturers and, as such, that they 
were entitled to buy everything that they required for their in- 
dustry at wholesale prices just as he bought the brushes, paints 
and canvas required in his craft. This same man it was who 
first proclaimed that no nation could prosper which subordi- 
nated the interests of its producers to those of its distributors. 

The second preliminary observation is important, though some 
of you may say it is superfluous. I think it well, however, to 
anticipate the objection that the agricultural conditions of Ire- 



20 MARKETING AND FARM CREDITS 

land and ot" the I'liitod States are so widely diit'erent that the 
praetieal exporionee. upon whioh .1 luaiuly rely for the detiiiite 
constnietive suggestions 1 have to make, is hardly relevant. I 
can only appeal to social workers to assent to the proposition 
that the Avidest diftVrenee between the physical, social and eco- 
nomic conditions only serves to emphasize the transcendent iiu- 
portance of the hniuan factor. It may be sometimes hard for 
the social worker in the modern city to realize this truth : there 
is no fear of his forgetting it in the country. 

Why the Irish Needed an Agricultural ProgTam 

Whatever may be tliought of the efforts which have been made 
to develoyt the agricultural industry of Ireland, the neglect of 
it Avill. when the rural problem has been generally i*ecognized 
and dealt with, be ivgaxded as the classic instance of the bad 
consequences of the industrial revolution. The lack of coal and 
iron and the possession of considerable agricultural resources 
made it obvious that the prc>sperity of the country must depend 
upon a sound and progressive agricultural policy. That, at any 
rate, was the view of a body of rural social workei*s who, as far 
back as the year 1889. set themselves to attempt a complete i*e- 
construction of the agricultural life of their country. 

Ireland was then in the throes of an agrarian revolution simi- 
lar to that which has taken pkice in almost eveiy other Euro- 
j>eaai country. After a contlict extending over' the lives of sev- 
eral generations it was becoming plain that the inevit-able con- 
cession must be made. The farm lands would have to be trans- 
ferred from the small boily of largely alien owuei^s to the large 
body of tenants who were mostly of the peasant class. At the 
present time this huge transaction, involving the use of British 
ei"edit to an aggregate amount of a billion doUai-s, is about one- 
half comx-»leteil. and so far as the tenure factor is concerned the 
agricultural problem of Ireland nuiy be said to be solved wholly 
in principle and largely in practice. 

We did not have to touch the question of tenure because it 
had been happily settled, but we had to tight against the gener- 
ally accepted view that once fnrmei"s held their laud upon satis- 
factory terms and conditions they could be very well left to look 
after their own business and neeiled no uu^re external help, offi- 
cial or voluntary, than the manufactuivrs or tradei*s of the 
towns. This view iguoivd the economic changes which were 
taking place, notably the development of rapid and cheap trans- 



SIR HORACE PLUNKETT 21 

portation. The opening of the world market, as the economists 
called the result of the ever widening competition between pro- 
ducers and manufacturers, brought it about that farmers had to 
depend for their comfort and prosperity, quite as much as those 
engaged in other business undertakinlgs, upon a proper organiza- 
tion of their industry for production and marketing, as well as 
for the finances needed for both operation's. 

The Irish farmers Jiad, therefore, to be organized for the ad- 
vancement and protection of their interests. Defective as the 
old land system was, the estate gave a sort of corporate exist- 
ence to the tenants and when there was a good landlord, or even 
a good agent, their business was fairly well done. The land 
purchase scheme of the Britisji government, by buying out the 
landlord and treating each tenant individually as a debtor to 
the government for his land, abolished the only form of organiza- 
tion the farmers possessed. Hence, we had to think out a scheme 
for providing tens of thousands of small isolated farmers with 
some permanent form of organization which might in time lead 
to the establishment of the prosperous rural communities which 
should be the governing element in the Ireland of our dreams. 

Working out the New Policy 

You will see from this brief statement of the main facts that 
the government had swept away the agricultural economy of a 
country obviously depending for its prosperity on a well organ- 
ized agriculture and we had to build upon the ground thus 
cleared a new scheme of rural life. After a study of agricul- 
tural development extending over the continent of Europe, we 
adopted a fundamental principle of rural progress which is the 
distinguishing mark of the Irish agricultural policy. 

We ,held that if you would solve the rural problem you must 
approach it from three points of view. You must regard agri- 
culture as an industry, as a business, and as a life. To the in^ 
dustry must be applied the teaching of modern science, and that 
is the work of government and of educational authorities. Into 
the business must be introduced the methods practised by those 
engaged in every other occupation, and far the most important 
of these methods is combination, whenever things can be done 
more efficiently or more economically collectively than individ- 
ually. This, we hold, is the function of voluntary effort. It is 
work which cannot be done for the farmers, but must be done by 
them, and even the way in which they are to do it, of which I 



22 MARKETING AND FARM CREDITS 

shall speak presently, eannot be taught to theui by governmeutal 
agencies. Similarly, the life of rural eouiuiunities uuist receive 
as much thought and eare as are lavished on the analogous prob- 
lems of eity populations. 

Unless these tliree things are done — unless the industry is made 
adequately productive, and. the business is economically and ef- 
ficiently transacted — unless, most important of all, life upon the 
farm is pi*ovided with the physical comforts, the social pleasures 
and the intellectual satisfaction which are needed as a counter 
attraction to the lure of the modern eity — neither the rural popu- 
lation nor the industry which feeds the nation will occupy the 
place which properly belongs to them in the national life. 

Such is the broad principle of Irish agricultural policy, with its 
threefold aim. As I have said, the tlu'ee lines of advance — 
which we may call the technical, the coiumercial and the social — 
nujst all be followed. The government must do all that is neces- 
saiy to teach the farmer to farm. To that end we secured ihe 
creation and the adequate endowment of a suitable department. 
For the organization of the business — and this is the part of the 
work with which you are chietly concerned and I am asktni to 
deal — we invented the new agency of social service which we 
named the Agricultural Organization Society. The sole func- 
tion of this instit\ition is to teach farmers how to combine for 
business purposes. But this apparently simple tiisk has to over- 
come the auti-agrieultural tendency, the character of which I 
have suflficiently indicated. In the urbanisation of all thought 
the townsman is the business adviser of the farmer, but in one 
vital matter the advice of the town misleads the country. "Big 
Business" has enthroned capital as the dominant factor in pro- 
duction. About the only form of combination inidei*stood in 
your" country is the capitalistic form. In the British Isles, as 
you knoM", the cooperative system had its origin. But at the time 
I am speaking of — 25 year ago — cooperation had gone little be- 
yond the elimination of middle profits in the purchase of the do- 
mestic requirements of industrial workei*s. The joint stock 
company plan, under w*hieli, as you know, all the profits and all 
the control of industries go to capital, held the field. 

f Why the Joint Stock Company Fails 

Now the corporation or joint stock company form of combina- 
tion is wholly unsuitable to farmers. When they eombdne their 
object is not to make out of the undertaking big pi-ofits for the- 



SIR HORACE PLUNKETT 23 

capital invested, but merely to improve the conditions under 
which tjie participants conduct their own industry, the control 
of which they have no intention of giving up. For reasons you 
well understand — reasons both economic and social — they can 
combine successfully only under the cooperative system. But 
this system is necessarily somewhat more complicated than the 
capitalistic system, probably because it has to secure an equitable 
arrangement between a larger number of interests. Our farm- 
ers, of course, did not understand this and the available business 
advisers knew and preferred the joint stock plan. So did the 
lawyers, whose fees for organizing companies were generally out 
of all proportion to the trouble it cost them. For these reasons 
our newly invented organizing agency had to train field agents. 
These are called agricultural organizers and are virtually the 
agricultural counterparts of the efficiency experts who in recent 
years have become a very useful addition to commercial and in- 
dustrial life in the Umited States. 

So much for the principles and main working methods of our 
Irish movement. I now come to a very important question of 
procedure. Of the three reforms which, as I have said, have 
all to be undertaken before the rural problem can be solved, the 
first — and the one which is the foundation of the other two — is 
that which in other connections is more naturally placed second — 
the organization of business. Unless this order is observed the 
greater part of the work of the governmental and educational au- 
thorities in teaching farmers is wasted. Farmers will not invest 
more capital nor apply more thought and energy to production 
unless they are in a position) to reap the full reward of the im- 
provement in the quality and the increase in the quality of their 
product wliich is too often captured by the agencies of distribu- 
tion. It is also a matter of administrative experience that by far 
the best local agency for governmental and educational bodies to 
work with among fanners is a voluntary association of the latter 
for mutual business advantage. Nor until you have got people to 
come together in the business of their lives and have shown them 
that it is for their benefit to do so is it easy to organize them for 
the higher purposes of social and intellectual advancement. This 
business bond, we find in Ireland, overcomes the difficulties of 
racial, religious and political antagonisms, and I am convinced 
that it is the only solution to the difficulties which have been ex- 
perienced in organzing polyglot communities in some of your 
states. 



24 MARKETING AND FARM CREDITS 



Irish Rural Problem a Universal One 

The rural problem, then, not of Ireland onl}^, but of the 
English-speaking world, is to be solved by treating it compre- 
hensively and giving precedence to a part of it which the whole 
trend of modern economic thought has emphasized in the cities 
but ignored in the country. The principle involved is, I think, 
correctly stated in our Irish formula, "Better farming, better 
business, better living, ' ' always remembering the working direc- 
tions that you must begin w'ith better business. 

All tliis I know is somewhat theoretical, and purposely so be- 
cause we are discussing principles worked out in Ireland, but ap- 
plicable to the very different conditions of your country. To 
show you, however, that there is some practical achievement at 
the back of our theories it will interest you to know that at The 
present time there are in Ireland slightly over a thousand agri- 
cultural cooperative societies of various kinds, with an aggregate 
membei'^liip of a little more ihan 100,000, the vast majority of 
whom are of the small farmer or peasant class, and that they are 
doing an aggregate business of some $20,000,000. It would be 
safe to say that a \ery much larger volume of agricultural busi- 
ness is done in a manner far more favorable to the farmer than 
would othenvise be the case, on account of the example set and 
the competition established by cooperative effort. 

I do not wish to exaggerate the importance of these results, 
but they cannot be fairly judged without taking into account ad- 
verse conditions under which they were achieved. In the first 
place, the trade opposition to any form of cooperation among 
fannei-s was far more powerful a quarter of a century ago than 
it is today. The agrarian conflict, with all the political and re- 
ligious strife that accompanied it, had made the task of the mis- 
sionaries of self-help peculiarly difficult. The chief opponents 
of cooperation, the small country tradei*s, had immense political 
influen<?e and practically controlled the political machine. In- 
deed, the political influence of Little Business in Ireland is, I 
should say, much greater than that of Big Business in your coun- 
try. No body of men in their senses would in those days have 
devoted their time and energies to organizing Irish farmers had 
they had any less end in view than the building up of a new 
rural ei\alization for the country. Few of us will see the fru- 
ition of that hope, but we are all quite happy in the retiectiou 



MILLARD R. MYERS 25 

that we have truly laid the foundation of an edifice of Irish pros- 
perity which those who come after us will complete. — 
I come now, and you mil say it is time I did, to the one defi- 
nite constructive suggestion that I have to offer to the Conference.. 
You would ,have been spared the long story of agricultural co- 
operation in Ireland were it not for this one reason. The time 
is ripe for the doing in America what we are now doing with 
some degree of success. That is to form a nationial organization 
movement to carry out the organization of agricultural coopera- 
tive societies. 



THE FORM OF AGRICULTURAL COOPERA- 
TION NEEDED IN AMERICA ' 

Millard R. Myers 
Editor American Cooperative Journal 

Before taking up the subject assigned, let me discuss for a few 
minutes the broader subject of ' ' Community Cooperation. ' ' The 
farmer whose interests are particularly to be considered in this 
Conference is not a pauper or a beggar. Neither is he a million- 
aire, as the Chicago press so cordially pictured him to be a year 
ago. He has no ambition to manipulate government, to boss so- 
ciety or to receive charity at the hands of the state. He is inde- 
pendent and if given half a chance will contribute his full share 
to the prosperity of all. 

We are perfectly willing to say that he is the backbone of the 
nation, but the nation is not made up wholly of backbone. The 
backbone carries the head above it and encases the delicate spinal 
cord and nervous system without which life would be stagnant 
and inactive. Man without a backbone would flatten to the dust 
and die, and the nation without agriculture would starve. We 
do not forget, however, that the heart pumps blood, that blood 
gives nourishment and that nourishment also is necessary to life. 
The brain directs the action of the body. The muscles respond 
to the call of the nerves. The feet walk, tjie eyes see, the ears 
hear and with many people the hands talk. 

Just as the members are necessary to a happy, healthful, use- 
ful body, so all classes of the community contribute to make a 



26 MARKETING AND FARM CREDITS 

happy prosperous state. Each has his place to fill and his func- 
tion to perform. 

So long as each does his duty and performs his function the 
human body and the body politic is well. When any member 
gets out of joint the body is sick. Too much food causes gas 
in the stomach. Too much gas on the stomach makes pressure 
on the heart. This causes dangerous palpitation. Too much 
pressure in the blood breaks down an artery in the brain and we 
have paralysis. Likewise too much money in the hands of a few 
causes light-headedness. Light-headed control of industry makes 
undue pressure on agriculture and labor. This causes danger- 
ous palpitation in the markets and consequently results in strikes 
and other paralytic strokes. 

The ideal for which we all seek of coui-se is a condition in 
which the farmer Anil receive a fair profit upon his investment 
and upon his labor and produce enough food so that aveiy one 
may live and that every one that eats from the farmers' granary 
will give a fair return for what he gets. 

Under such circumstances we will have a better community 
life. The home, the school, the church and the warehouse are 
the four institutions through which the people in the community 
must work out their proper relation to each other. Most com- 
munities should create a better community center than they are 
now enjoying. Nothing is more generally true than the state- 
ment that ''You cannot hate a man if you know him well 
enough." 

What Is an Ideal Rural Neighborhood? 

The ideal for a country' community to my mind would be, one 
schoolhouse, one church, one store. These, properly organized 
would give the greatest efifieiency and the greatest economy. In 
the city the units should be defined and intelligently worked out 
so that all necessary expense and waste should be eliminated. 

A great many neighborhood feuds and jealousies are created 
and fostered and kept alive because different nationalities are not 
forced to mingle and mix through their institutions so as to be- 
come acquainted with each other. In this suggestion we must 
make an exception of the colored race in the South. The 
churches designed for the salvation of man are a source of con- 
tinual jealousies and differences in many communities. We 
need fewer churches and better ones. To my mind the less com- 
petition we have in the schools the greater the peace of the com- 



MILLARD R. MYERS 27 

munity. The less competition we have in the church the better 
for all of us. The less competition we have in trade the greater 
efficiency, the less expense and waste. 

We need the consolidated school and the consolidated church. 
We need the cooperative method in trade. The commercial club 
formerly designed for the benefit of the merchants in town 
should extend its membership so as to include not only the busi- 
ness interests of the small town but the citizen of the entire 
community. Its membership should consist of the preacher, 
teacher, lawyer, the butcher and the farmer. Through its proper 
organization there should be several community days each year 
in w^hich the people in the town will close the stores, those on the 
farms will take a holiday and they will spend a day together in 
fellowship, neighborliness and friendly discussion of the topics 
which are of interest to every one. In some such plan as out- 
lined above all the different factors in the community should be 
brought together locally and the most cordial and friendly rela- 
tionship should exist between their state and national organiza- 
tions. 

Importance of True Community Spirit 

IVIir. Rockefeller may not make a handsome appearance dancing 
with the wives and daughters of the miners in Colorado, but that 
act typifies a community spirit that must be fostered if future 
generations are to be happy. 

The farmer as well as all other classes of citizenship must 
realize that we are all so far removed from the savage that our 
relations are absolutely dependent and not independent. Each 
class of society, or each line of trade, if you please, must con- 
tribute to the other and be satisfied with a fair return for service 
rendered. Each must cooperate with the other in working out 
the proper community interest. 

Now to address myself directly to the subject assigned, ' ' The 
Kind of Agricultural Cooperation Needed in America," let us 
divide the subject into two heads : First, the trading body ; sec- 
ond, the educational and propaganda body. 

The farmers have tried to engage in business on a partnership 
basis. They have tried voluntai^ societies. They have tried 
a great many different plans, but none of them has achieved any 
importance either in point of turnover or in permanence of ex- 
istence without some kind of corporate organization and the in- 
vestment of money. The county agent may occasionally nego- 



28 MAUKKTING AND FAUM OREDITS 

tiate for several oarloads of fertilizer ami may sometimes tiud a 
buyer for puiv-lnvd hoi-ses. but he \nll be obliged to dopeud 
upon some ivirular ebanuel of tn\de for jvuy permaueut develop- 
uieut. The eouutry club may ooeasioually ship iu a ear load of 
potntiH^s or eoal whieh will be luilojuied fnnu the ear to the farm- 
el's' AvaiTOus, but the Siivinar will be of little value in any broail 
eonsideration of the ma.i'ketinj; question. 

There is only one way for the farmer to enirajre iu business 
and that is to invest emnigh money to buiUl the waivhouse. 
whii'h he needs and to equip it with seales and other mvessary 
eonvenienees. This point needs no further argument. 

With the possible exeoption of mutual insuranee livesto*.'k 
shipping assiH'iatious and the persoi\al loaning sovueties. every 
etVort at eixiperation nuist aim to have volume lai*ge enough to 
employ the eontinual daily service of at least one able manager. 
ludtHHl, it is the opinion oi the writer that a farmers* society is 
far from nuvisuring up to its ov>portunities in the eomnuinity if' 
it dix's not develop a trade suttieiently strong to enable it to em- 
ploy a maivagvn-. a bookkivper and in most instiinees from one to^ 
tluw other pei">ple all of the time. 

Kegaixlless of the form of oi*g!unzation. farmers have learned 
that a retail soeiety eaunot do business at wholes^de priees and 
sueetvd. It ei>sts money to do the b\isiness and a neeesiSiiry mar- 
gin must be taken on the n\ereha,udise haudhHi to eover the in- 
teivst on the iuvestuunit and the expense of handling. 

Need of Business in Farmers* Societies. 

Farmei-s* organizations the Siinu" as any other organizations; 
n\ust run on business principles and take a margin lai*gt^ enough 
to guarantee sueeess. 1 estimate that at least 50 per cent of all 
etVorts at eivp^'i'^^tion among farmei's in their grain elevators. 
civameries, banks and stoivs undertaken during the past 15 
veal's, have used the onlinary iHU-poration form of oi*ganization. 
Tliey have capitalized fnuu $o.OiX> to $7r>.lXXl have placed the 
par vahie of shaivs at tVuu $10 to $100 each and have sold the 
stoek to the faxmers in the community. In many eases they 
have taken in the people of the tow^l including the bankers and 
meivha.nts. ^lany of the farn\ei's who wen^ lai*ge pivdueers at 
the tin\e the s^x'ieties weiv oi'gani/ed aiv now rerired aaul have no 
grain or other farm pivduee to sell. 

ilost of the couvpauies. at least during the past 10 yeai-s. have 
made a tinancial success, thousjmds of them have accuuuilated 



MILLARD R. MYERS 29 

good suri)lus and arc in, a. prosperous condilioii. I lor one am 
convdnced that it is possible for the farmers to organize in tho 
same way tliat all oilier business is organized and make a com- 
mercial success of the uiuiertaking. 

As final evidence in this argument I refer you to tho Farmers' 
Qnun Company a.t Syracuse, Nebi-aska, wiiic,h has been success- 
fully conducted on this plan for a cpiartcr of a century. The 
present manager has kept the position ol" manager lor 22 years. 
This illustration can readily be iiudtiplied by Inindreds of suc- 
cessful companies in the grain belt that, are organized on tlu; or- 
dinary corporation plan and that havi; ma(li> a success of their 
business. 

They 'have been able to meet competition; have forced the 
business to be handled on a close margin and have i)aid satisfac- 
tory dividends to the stockholdei's on the investment. 

Please note that I say *' these, companies have made a success 
financially of their undertaking." T desire now to call attention 
to the wejdtncsses which show up in time in the nuijority oL' these 
compajiies. The strong tendency of all farmers is to get away 
from the fimdamental purpose of their organizations, namely, 
to ^make a market. If they are very successful for a few years, 
they l)egin to accumulate a good sui-plus. The stock becomes an 
attractive investment from a dividend paying standpoint. The 
spcculatore buy it. By speculators I mean retired farmers, 
banJkei's and other conununity interests. Most societies have 
tried to protect against this in so far as possible by placing in 
the by-laws a limitation upon the number of shares that any per- 
son may own. As you all know some communities are blessed 
with large families and by the time the grandfather and grand- 
mother, the father and mother, all the children and grandc^hil- 
dren, uncles, aunts and cousins get the limit of shares you find 
large holdings in one family. The tendency to centralize owner- 
ship and control is almost too strong to be withstood. 

Whether this occurs or not just in this manner the large sur- 
plus is looked upon by the renter as having been brought about 
by an unjust profit. The competitor naturally argues that the 
farmers' company is taking as wide a margin as he is and points 
to the surplus to prove it. The result most naturally follows 
that the renter concludes that there is no difference between 
the f armere ' company and any other company ; that both are out 
for the profit they can make, and that it is up to him to sell his 
grain or other product in the best market he can find. As a cou^ 



30 MARKETING AND i'ARM CREDITS 

sequence the farmers' cooperative company has little or no ad- 
vantage in its effort to secure trade from the farmer. 

The population of an agricultural community almost com-- 
pletely changes every 10 years. The active producer of today 
retires or moves away and the new farmers look neither back- 
wards or forwards; aaid thus the farmers' corporation, (so-called 
cooperative society,) stands to him and thus to the whole com- 
munity as a business enterprise run for profit and has no very 
decided advantage over the independent dealer or the line house 
operator. Meanwhile the stockholders are looking anxiously for 
large returns on their investment. They are perfectly willing 
to accept 100 per cent dividends if the company can afford to 
pay it. They t^ke pride in knowing that their original invest- 
ment of $50 is worth $100, and this tendency growing sti*onger 
and stronger changes the purpose of the corporation from that of 
making a 'market for the farmers of the community to that of 
making a margin for its owner. • 

Corporation Weak in Teamwork 

The second weakness of a corporation is its absolute inde- 
pendence of all other organizations. Its owners say ''We are 
making a success of this business here, let other men in other 
towns do the same." The cooperative spirit which should exist 
between different bodies of farmers operating to the same end is 
lost sight of. The managers and directors and the entire body of 
stockholders have a tendency to ignore all kinds of cooperative 
education. They feel that they are so well entrenched that they 
do not care for it themselves and they are just normally and nat- 
urally a business institution. The directors are afraid to take 
the interest they should take in a larger work for fear they will 
be criticised by the stockholders. 

It is needless to say that this attitude on the part of the indi- 
vidual society will greatly retard if not completely prevent any 
larger federation of the so-called farmers' cooperative societies. 

These weaknesses of the joint stock method of organization are 
so \dtal in their working that they practically destroy the funda- 
mental purpose of the organization and are therefore considered 
by the writer as wthoUy inadequate. 

We have said farmers' organizations must invest money, they 
must build and equip warehouses suitable to the business engaged 
in. They must employ a manager and develop a volume of busi- 
ness sufficiently large to pay a good man well. 



MILLARD R. MYERS 31 

The corporation fails in the test of years to make a market. 
The partnership is thrown out without consideration chiefly be- 
cause it involves the feature of unlimited liability. The farmers 
are not willing to become responsible pei*sonally for the debts 
of the society. This brings us to a consideration of the coopera- 
tive system of organization. 

Rochdale System Good for American Farmers 

After years of careful study and observation both in Europe 
and America I am convinced that the Rochdale system of cooper- 
ation is best for American agriculture. In fact it is so well 
adapted to our needs that it fills every possible emergency. It 
is not only beautiful when considered by idealists but it is in- 
tensely practical when considered by business men. The aver- 
age agricultural business organization consists of from 100 to 
150 farmers. While we will concede that it is better where 
possible to have these organizations composed entirely of pro- 
ducers I see no objection to allowing retired farmer or the 
friendly business man to own shares in a cooperative society. 

Under the Rochdale system each man will have one vote re- 
gardless of the number of shares he owns. This qualification 
guarantees the society against the control and manipulation of 
capital. So long as there are 3 members in the society and 
2 of them are producers they will control the society even 
though each of them has but one share and the speculator has- 
98 shares. For this reason there is no desire on the part of a 
manipulator to get control of a cooperative organization. 

The second provision is that only a fair legal rate of interest 
shall be paid on the capital invested. This is usually limited to 
8 per cent or less, and in some states the limit is 10 per cent. 
This second qualification prevents the centralization of the 
shares. There is no very great incentive to purchase shares of 
stock that do not carry a vote with them and on w^hich you can- 
not receive more than the legal interest rate in the form of cash 
reitums. 

Third: After a surplus which will guarantee sufficient work- 
ing capital has been secured all other earnings are prorated to 
the members on a basis of their sales to the society or purchase 
from it. This division is usually made once a year inasmuch as 
in most business enterprises it is not convenient to take an inven- 
tory and determine the earnings oftener than once a year. In 
the creamery the same result is obtained by settling for the cream. 



32 MARKETING AND FARM CREDITS 

once or tAnoe a luoiith after paying all necessaiy operating ex- 
penses. The result of this trade dividend is the wiping out of 
all unnecessary surplus and of giving to the persons who furnish 
the trade on which the profit was earned the full benefits of his 
trading. 

What a Kansas Society Did For Itself 

To nuike the value of this method clearer I tell the case of 
the Farinei*s' Grain Co. at Ensign, Kas., during the year which 
closed Jainiary 1st, 1915. The company made a profit of over 
$22,000. T^ey consigned a large volume of w^heat south. By 
the time it reached Galveston it had jumped several cents per 
bushel and fhe earning was very large. When the year was up 
the company paid interest on the money invested and then paid 
each stockholder an additional dI^o cents per bushel on his gi*aiu. 
In a properly organized cooperative society the shares are small 
enough that there is no renter within readi of the company who 
is not able to buy at least one share of stock and become a share- 
holder. This guarantees to him that his company Tvill pay him 
all his produce is worth on the nuirket. will operate economically 
and elficiently and at the end of the year will pay him an addi- 
tional premium, providing the company has any surplus to 
divide. 

The tendency of this fonn of organization is to extend its 
membei*ship to every possible customer. The benefit is so at- 
tractive that eveiy mau who can possibly do so wants to become 
a member. The plan is so equitable and fair that it appeals to 
eveiy fair-minded pei"son. The competitor finds no vulnerable 
point of attack. It is manifestly fair to 'the investor because 
he gets interest on his money. It is fair to every member be- 
cause he has as much of a voice in its management as any other 
member. It is fair to its patrons because each patron may be- 
come a share holder and thereby be guaranteed that his product 
wiU be sold in the best market of the world and that he will re- 
ceive the highest market price for it after the necessary operat- 
ing expenses have been deducted. 

The plan is democratic and the method is of the highest tA-pe 
of business practicability. Under this plan the patrons vrill not 
object if the society takes a sufficiently 's^ide margin to guarantee 
it against loss. If the market is precarious and the manager 
finds it necessary to exact a little more toll to insure the society 
against loss, the customer either will hold for a little later market 



MILLARD R. MYERS 33 

or ih.€ will willingly accept the rule of the management because 
he knows that if the society makes a handsome profit on the busi- 
ness of the year it will come back to him as a dividend on his 
trade. Where the company is carefully managed it will be the 
rarest exception for it to be necessary to make up a loss. 

Should it be necessary to make up a loss for a society that 
is managed on the Rochdale system, it would need to be made 
up in about the same way that it is made up when the loss is sus- 
tained by a corporation or any other form of business enterprise. 
It may be done by assessment but more than likely it will be 
necessary to reorganize or at least canvass the membership and 
ask them to subscribe additional funds. 

The Rodhidale plan provides that a small portion of the earn- 
ings be set aside for educational purposes. The law under which 
most of itlie societies both at home and abroad operate allows a 
proportion of the funds of the local society to be invested in a 
wholesale society. This is also provided in the by-laws of each 
local organization. This enables the cooperatives to spread out 
and occupy in a competitive way the field in which they operate. 

Local Units a Necessity of Success 

Ths brings up the important question of expense. I have 
little use for the many efforts at cooperative organization so com- 
mon in this countrj^ where the individual farmer invests money 
in a manufacturing plant or a packing house or a wtholesale so- 
ciety of any kind located far away. In most instances he can- 
not be a patron of the enterprise himself and the ordinary cooper- 
ative benefits can never accrue to him. 

The single individual investor is too small a unit to be joined 
together at a long range successfully. Cooperation is essentially 
a home-grown plant. The farmers can cooperate with each other 
in shipping their livestock, butter, eggs, hay or grain. They can 
cooperate in forming a local society which will sell them the 
bulk of the farm supplies. They may occasionally here and 
there cooperate in organizing a general store but in this day of 
mail order competition and department store competition, this 
is a special proposition which the farmers are not able to handle 
successfully. But in lines which they use in bulk and under- 
stand thoroughly they are successful. 

After the local society is organized on the Rochdale plan and 
becomes a successful unit it is then an easy matter for these 
community units to federate with similar cooperative organiza- 

3— M. F. c. 



34 MARKETING AND FARM CREDITS 

■tions in tllie same state or even in other states for forming a 
wholesale society. 

The investment in this case should be limited as also the voting' 
strength should be limited so that the control would remain with 
the local societies. 

A body of stockholders considering an investment of a thous- 
and dollars in a wholesale society or even a board of directors 
considering it would be able to analyze it carefully and 
thoroughly and even would be much more likely to succeed than 
the ordinary cooperative effort which is promoted by a few men 
who may be idealists or theorists without practical business 
training, or even dishonest stock jobbers. 

Under the Rochlale plan in the old country the wholesale 
society receives large sums of money called ' ' loan capital, ' ' pays 
a low rate of interest for it and loans it conservatively on good 
security. A loan which illustrates tjie strength of the coopera- 
tive wholesale society of Scotland was that made to the city of 
Glascow of $2,500,000 at the time the city purchased the street 
railway system. 

It is not a matter of securing money with them, for the reason 
that they are old and thoroughly reliable. The people have 
greater confidence in their stability than they have in private 
enterprises or even banks, and are more than likely to leave 
their money where it will bring 3 or 4 per cent interest and at 
the same time be working for their benefit. 

"Wholesale societies have invested immense sums in manufac- 
turing enterprises, such as flour mills, bake shops, shoe factories, 
pickling works, tea plantations, etc. In time the cooperative 
movement among the agriculturists of this country will no doubt 
develop to the same extent. 

The Educational and Propaganda Department 

There are 4 sources from which education and propaganda 
may come. The government, general publicity, outside coopera- 
tive influences and the farmers themselves. 

There are those who believe that our state government, or even 
our federal government tlirough their office of markets, have a 
constitutional right to organize cooperative societies. If this 
view is correct I have no doubt but what the country could be 
greatly benefited through this branch of our government. How- 
ever, personally I doubt the constitutionality of such work by 



MILLARD R. MYERS 35 

the office of markets or even by the marketing department of 
state government. 

The man who has spent 25 years in building up a store, cream- 
ery or elevator feels that he is rendering a valuable service to 
the community, that Jie pays his proportion of taxes, is a good 
citizen and is entitled to the same protection that society ren- 
ders to other citizens. He does not feel especially patriotic 
when told the government is sending a couple of promoters in 
his community to raise money to establish a cooperative society,. 
the mission of which is to put him out of business. He would 
feel that he would be entirely justified in dodging his taxes if 
they were to be used against him in this way. I am not very 
enthusiastic for such aid at any time. 

Limitations of Government Aid 

No doubt the farmers in Arkansas are victims of a bad trad- 
ing system. Many well informed southern gentlemen contend 
that the tiller of the soil himself is hopelessly lost unless the gov- 
ernment assist Jiim in his need of credit and the proper selling 
and buying facilities. 

I am not going to argue this point but I am going to state- 
that the class of society that must be aided by government money 
will be a long time in developing the spirit of independence and^ 
self-reliance that is necessary for any man to have to achieve 
success. Only in the most extreme cases, therefore, would gov- 
ernment aid be justified. 

The government is entirely within its rights in making a thor- 
ough investigation of marketing systems and publishing bulletins 
showing exactly what is being done by cooperation. In this way 
they are disseminating a great deal of valuable information 
wholly within the province of the government. 

The cooperative movement, especially among the farmers, is 
receiving a lot of general publicity free today. The farm press, 
even the daily paper, is giving editorial space to the subject. 
This serves to acquaint the general public with the proposition,, 
but of course no papers of importance outside of those directly 
engaged in organization work are advocating any panticular- 
propaganda. While this general publicity is valuable it is of 
rather secondary importance. The examination of our Ameri- 
can movement will show few exceptions to the above rule. 

The American Society of Equity, which has stood about as; 
much punishment by its friends as any farmers' society in the 



36 MARKETING AND FARM CREDITS 

histors' of the ropiiblic, is an example. It was started by a pub- 
lisher at Indiauapolis, Ind. Its purpose iu the begiuuiug was 
priuiarily to iret subscriptions to his paper. In an almost in- 
creditably short time the promoters succeeded in spreading the 
sentiment fi-om Dakota to Kansas and uniting more or less 
closely around their publication several huudved thousand 
farmei-s. The farmei*s were told to hold their wheat for $1 a 
bushel, their tobacco for so much a pound, likewise (their beans 
and other xu'oducts. It was fully intended, according to the 
literature which was sent out. that the law of supply and demand 
should become inoperative, that the farmer could hold his wheat 
and dish it out to a hungry public whenever it was willing to 
pay him $1 but not before. 

This was a beautiful theoiy and it is not strange that it ap- 
pealed to the large body of farmei's who were selling wheat for 
less than the cost of production. To any one familiar with con- 
ditions in Australia. Siberia and the rest of the wheat-growing 
-countries it is not any great surprise to learn that the society 
failed to control the price of wheat. They did not fail, however, 
in getting enough support to the central organization, which was 
collecting dues from each member, to make it very successful. 

Then came the struggle between the actual farmers who made 
up the organization and the outside cooperating intiuence which 
had established it. 

At their annual meeting at Indianapolis cert<iin new leadei^s 
proposed to buy the farm paper and to employ the president at 
.a nominal salary or get a new one at less money. The conven- 
tion split on the proposition. The publishers oiferei.! to take 
$75,000 for the publication and the president to accept a salary 
-of $5,000 a yeai*. Tliis was considered an unreasonable demand 
and a tight followed. The farmei's who made the fight secured 
the control of the society all right but were obliged to fight in 
the courts several slander suits vrith. the i*esult that they lost a 
lot of money for themselves and for their society and eventually 
gave it up altogether and went into other occupations. 

The publisher kept liis paper and started another society 
called The Farmei's' Society of Equity. This society still ex- 
ists and as we uudei*stand it is promoted and controlled by the 
publisher but has never assumed the strength nor the propor- 
tions of the original elfort. 

The American Society of Equity has continued on its way 
practically without strength excepting iu Xorth Dakota. Wiscon- 



MILLARD R. MYERS 37 

sin and Kentucky, The farmers are in control within these states 
and apparently have enough power to carry on their educational 
propaganda work successfully. At the present time their edu- 
cat|ional institution located at Madison, Wis., receives enough 
money in dues to publish a respectable newspaper and to carry 
on a certain amount of organization work. T,hey also contribute 
to the national organization. 

The society in North Dakota has also continued to support its 
state organization and to contribute something to the national 
organization. During the past 3 or 4 years they have en- 
gaged in the promotion of several cooperative packing plants 
and a terminal grain exchange. To date none of these enter- 
prises are really successful. They are directly under the con- 
trol of ithe farmers who own them and the propaganda bodies 
which have created them were at one time at least farmers. Some 
of them are now rather to be classed as professional promoters 
than farmers. 

Time forbids taking up efforts by the farmers promoting so- 
cieties. Mir. Slocum of the Gleaners is here as is also Mr. Tous- 
ley of the K|ight Relationship League. These men will no doubt 
tell us at some stage of the convention the form of organization 
needed for cooperative promotion. Representatives are here of 
practically all other propaganda bodies, and we will have the 
opportunity of knowing their experiences. 

Outside Influences and the Grain Farmers 

I refer briefly now to the farmers' grain dealers movement 
with which I am most intimately associated. This movement 
was started by the farmers themselves, but was really fostered 
in every step of its development by outside influences. 

The outside influences were the grain commission merchants 
in the terminal markets. When the farmers first began to or- 
ganize elevators, the line house and independent shippers of 
grain were very well organized and most receivers could not 
afford for that reason to accept consignments from farmers' 
companies. A few commission merchants, however, could make 
a living out of the scattering shipments from the farmers^ 
houses. These men were interested in every new farmers' com- 
pany that was organized because it increased their volume of 
business. Accordingly they sent organizers into the field who 
made addresses and assisted in every reasonable way in perfect- 
ing farmers' organizations. 



38 MARKETING AND FARM CREDITS 

The Anierien Cooperative Journal was organized very early 
in the history of this movement. It was published in the inter- 
ests of cooperation in grain and owned by three men. From 
these 2 outside cooperative sources the farmers' elevator move- 
ment in the early days received a great deal of assistance. In 
fact when there were but 17 companies in the state of Illinois 
they were called together upon the initiative of a commission 
merchant and organized the Farmers' Grain Dealers' Association 
of Illinois. The next year the same kind of an organization was 
formed in Iowa and later on in the other states. 

These associations have grown stronger from y^ar to year. 

As the volume of business has increased, other commission mer- 
chants came forward to solicit the business and to render assist- 
ance to the farmers' companies. Today the entire terminal 
grain trade is seeking this business and their solicitors travel 
the territory closely and they continue to render valuable as- 
sistance to the farmers' companies. 

Grain Growers Control Journal ( ' 

Four years ago the various state assoqiations purchased the 
American Cooperative Journal, put it under the control of trus- 
tees and are operating it in connection with their business. They 
raise a sufficient amount of money in the 7 organized states 
to employ a state secretary. They employ him on full time at 
a decent salary in Illinois, Iowa and Nebraska. They also have 
given him an equipped office in each of these states with such 
stenographic assistance as is necessary. 

The other organized states, namely. North and South Dakota, 
Minnesota and Kansas employ a secretary only part time. 

The state associations are engaged in educational work. They 
also assist in organizing new companies. Likewise the American 
Cooperative Journal sends out organizers and is devoted to edu- 
cation propaganda in all the states. Each company is sovereign 
and it is under no obligation to any other company, to the state 
association or to the American Cooperative Journal. Individual 
members pay no dues. Companies pay $20 a year and may 
drop out at any time when their dues are fully paid. 

The board of directors of each state elect 2 members annu- 
ally to make up the nattional council. The national council, 
therefore, consists of 14 members — 2 from each of the 7 organ- 
ized states. Its by-laws are liberal and its intention is to ae- 
, cept representation from all state organizations that desire to 



CHARLES A. LYMAN 39 

work with them. To date their work has been chiefly legislative. 

This form of organization has been criticized by some organ- 
izers as a rope of sand. There are those who feel that there must 
be a centralized effort and the power of assessment in order to 
get money that is needed, etc. We have not found it so in this 
organization and to my mind, we are rapidly approaching the 
time when these organizations will have all the funds needed t-o 
do all the educational and propaganda work that they find 
necessary. 

If I were to state the kind of agricultural cooperation needed 
in America from the standpoint of the propaganda body I would 
say that the Farmers' Grain Dealers' Association comes nearer 
to it than anything else we have. Cooperation is not something 
that can be forced upon the people. It is the people's movement 
and the success will depend practically all together upon the 
sentiment of the public regarding it. 

Our companies are succeeding and our movement is succeeding 
because they are rendering a service that is necessary. We are 
purely democratic and carry on all of our work in a business 
way. We are somewhat lacking in working funds but this is 
due more largely to a lack of general machinery with which to 
do a larger work than anything else. 

Our leaders have the confidence of our people and will be able 
to secure the funds with which to carry on any work that they 
can show is practical and worthy. 



THE COOPERATIVE SOCIETY IN WISCONSIN 

Chaeles a. Lyman 
Chairman Legislative Committeei Wisconsin Society of Equity. 

What the merchants' and manufacturers' association, the re- 
tail lumber and hardware dealers' associations, the bankers' as- 
sociation and the federation of labor are to their members the 
Wisconsin agricultural cooperative societies, federated into the 
Wisconsin Society of Equity, are to their constituents. The fol- 
lowing is a partial list of accomplishments directly traceable to 
its influence : 

1. A state-owned and operated binder twine plant at the 
state's prison at Waupun. This cost $650,000, but so lowered 



40 MARKKTlXil AND FAKM CREDITS 

tho price ot' Iwiiio that tho saviui: alroaily to the t'armei'>> of 
Wiseousiu ^VlnlKl probably pay for the eo^^t of eoustruotion. 

'2. The eoi^perative hiw, i-reateil in liMl, \vhieh at that time 
Nvas eonslJered to be the best in the bnited States. 

:>. The State Hoard o( rublie AtTairs. ereated also .in hUl, 
whieh has aideil in tlie anditiiiir of the aeeonnts of coopera- 
tive societies, iudped in the formation of UH'al aetivitaes of a eiv 
operative nature, edueated the piiblie as regards standard trrades. 
jvu'ks. brands and trademarks, investiiratod tlie eheddar cheese 
sdtnation and aided in the forn\ation of the Sheboypm Comity 
Cheese Produeers' Federation. .\ reeent ehaniro of state ad- 
ministration has resulted unfortunately in a serious eurtaibueut 
of the Nvork alone the lines numtioned. 

4. The department of rural eeonomies in \9\\ and the depart- 
ment of eooperation and nuirketiuir in liVlo at the colloire of ag- 
rieultniv of the T'nivei'sity of Wiseons^in, 

A movement that eotdd nuike so etvditable a shoMUUir from a 
eooperator's standpoint, eould not do so without a stroui^ eentral 
oriranization. At Madison, the state headquarter^!, we have a 
secretary ^vho has an ottice ^vith modern appointmentis. sten- 
Oirraphers. and everythiui: in proper shape to carry on the ^vork. 
-He is a.lso the editor of our state paper called The Equity News. 
Theiv is a bus,iness department also, that in the 11 months pivst 
lias handled #l.lIOO.lXX> worth of business for Equity assix'ia- 
tions and other cooperative soivieties. This department has been 
in existence less than 'J years and d^vs not include the business 
activities of the Sheboyirau County Cheese Federation, the Door 
Comtty Fruit Association nor the other lartre fruit selling eoii- 
eerus in the state; but has taken in simply the Equity and a few 
Grange people who are selling their livestock, potatoes and hay 
cooperatively, and who are btiying their agricultural ivquiiv- 
nieuts through their purchasing agent. 

Policy as to Joint Piu'diasing 

The otncial policy of the Society of Equity does luu couiem- 
plate the purchasing of grvverit\fi and household gv'it.Hls by its 
menibei*s, AVe do not go so far as that. But liere is what we 
do say when a merchant complains because an Equity concern 
over in Plum Crivk. we will say. is buying giweries for its mem- 
bers: ''Air. Merchant, you know what happened in riiiui Ciwk 
Wfore the coi^perative sot»iety was organized," and the history 
of the ease probably was this, — that the local merchants there 



CHARLES A. LYMAN 41 

had s(iiieezed the farmers sO' hard and for so many years, that 
when the farmers did get the machinery for purchasing agricul- 
tural requirements they went the limit and ordered their gro- 
ceries and household goods also. Under conditions such as 
these one feels the farmers were justified in their action. I have 
heard some of the farmers say to a merchant who opposed agri- 
cultural cooperation, something like this: "By the way, I be- 
lieve you own 160 acres out here in my township. You are 
farming and you are competing with me. Yet you say it's 
wrong for a group of farmers to buy their own requirements 
through their own organization." 

I do not know how weighty this argument may be, but I do 
know that there are hundreds of men in Wisconsin who have 
fine farms and who are benefiting by the rise in value of their 
land, and it may be an argument that is worth something after 
all. 

The Soeiety of Equity has no desire to cross swords with our 
agricultural college; it would prefer to lock arms with it and 
similar institutions ; for both have their fields of activity in which 
they can work to best advantage. There must be a coordina- 
tion of effort, however, and an intelligent appreciation of the 
problem of rural life as a whole. We are certain that peach 
growers this year were not so much interested in Bordeaux 
mixture when seeing piles of peaches rotting in their orchards ; 
how to get their fruit to the consuming public is what they want. 
Problems of marketing and distribution demand immediate at- 
tention and to this newer field we would respectfully refer the 
activities of our agricultural colleges. 

Need of Economic Education Is Great 

Wisconsin is justly famous for its pure-bred livestock and 
pedigree grains. In this field the university has done pioneer 
work. People come from every state in the union to buy 
Guernsey cattle in Waukesha county, because the farmers there 
have made a specialty of that breed. The average farmer in 
Wisconsin, however, is not selling pure-bred cattle iat a fancy 
price. He is hard pressed to secure enough cattle of any breed 
and when he sells, it is usually for what the local stock buyer 
is willing to pay. And so we feel that average farming condi- 
tions must be improved at the same time that our colleges are 
providing for the comparatively few who can now avail them- 
selves of the teachings of science. After all the welfare of the 



42 MARKETING AND FARM CREDITS 

masses is what constitutes the welfare of the state. Not all of 
our half million farmers can receive technical training and 
some of them will have to be satisfied to sell their produce on 
the open market. If they did not and all raised Pedigree 
Barley and Number 7 Corn there would be an over-production 
of seed grains. 

Many people interested in agricultural cooperation are tak- 
ing the following view of the situation. They say: "In Wis- 
consin we have '200,000 operating farmers, — with their sons, 
reaching a total of 500,000 people. Only a few of us from the 
nature of things can ever attend the university or farmers' 
courses. If you could educate a thousand a year, which you 
cannot do at present, it will take 500 years to give us all an 
agricultural education. Most farmers do not keep hired men 
in the winter time — who will milk the cows while we go to 
Madison to study scientific farming? Even if our wives can 
milk we do not like to have them, and besides, who is going to 
take teare of the children when the women folks drive to the 
creamery with the milk?" There are thousands of farmers in 
Wisconsin who because of physical conditions are unable to 
leave home even for the 2 weeks' short course at the agri- 
cultural college. With many the expense of the trip precludes 
doing so, if for no other reason. 

The complaint is frequently made by professors in the uni- 
versity and by extension workers generally, that there are 
many communities in Wisconsin where the farmers are antag- 
onistic and are not willing to accept the teachings of science. 
I have replied to this criticism by saying that the farmers in 
these localities are not ready for the advanced scientific in- 
struction which our colleges are giving. I believe that it Avill 
repay an agricultural college many fold to understand that 
farmers will be quicker to apply scientific methods to their 
industry after they have learned the value of science in the 
conduct of their own business activities such as in cooperative 
creameries and cheese factories, and in associations organized 
for the purchase of their agricultural requirements. 

Why Cooperation Would Help Wisconsin 

To illustrate the value of an organization society in a state 
so essentially agricultural as is Wisconsin, I shall tell you as 
briefly as possible, of the effects of organization work in Ire- 
land. Mr. Holman and myself were fortunate in being able 



CHARLES A. LYMAN 43 

to go to Ireland this summer and travel over that little country 
which is smaller than Wisconsin, with the agricultural organ- 
izers employed by The Irish Agricultural Organization Society, 
'Or the I. A. 0, S. as it is commonly known, and which as you 
linow, was founded by Sir Horace Plunkett. During my 
rounds of inspection I visited a creamery in County Donegal 
in the northwest part of Ireland. There were about 1,500 
members. I found them a happy and bright class of people, 
but they were not well-to-do in our meaning of the term. 
Nevertheless, they had a creamery that cost $10,000, modern 
machinery worth $2,000 more, a comfortable and attractive 
house for the manager, and the house and the creamery were 
built of stone on the surface of which Dorothy Perkins roses 
were climbing and growing in profusion. Everything was of 
a most substantial nature. A stone wall 2 feet in thickness 
was built around the front of the creamery and all around the 
manager's house; the entrance to the house was between high 
stone gate posts on which iron gates were hung in so substan- 
tial a manner that they will probably swing true for a hun- 
dred years to come; and in the creamery they were making 
absolutely splendid butter. 

Now, why were they able to do all this? Because the propa- 
;ganda body, the I. A. 0. S., was watching over this society 
along with several hundred other creameries and because the 
organization society had employed the best dairy expert in the 
United Kingdom to advise them and to see that everything was 
going right. This expert does not do it all himself, — ^he^has a 
number of organizers working under him who travel around 
the country in Ford m;otor cars — but he draws plans for the 
creameries and he keeps in touch with all new improvements 
in the field of dairying, especially in Denmark and Sweden 
where most of their machinery is bought; and he not only tells 
the members what kind of machinery to get but he actually 
superintends its installation, and he will get down on his knees 
if anything is wrong with the slant of the floor, and he will 
correct the defect and see that everything is lined up properly. 
,The cooperative creameries in Ireland are making better but- 
ter than we are making in Wisconsin. The best Irish butter 
is as good as the Danish butter, which is the finest in the 
w^orld; and the poorest over there is about as good as any you 
will get in this country. The success of these cooperative 
creameries is due to the fact that the farmers realize that suc- 
cess or failure is due to their own exertion ; that these are their 



44 MARKETING AND FARM CREDITS 

own creameries and that they are going to get whatever profit 
there may be in the manufacture and the sale of butter; and 
since these are their own creameries tlie farmers are going to 
bring sweet milk every morning — as a matter of fact the milk 
is tasted, and if it is sour it is not accepted. 

How Ireland Improves Butter Standards 

An organizer working under the direction of Mr. Fant, the 
dairy expert, goes about his work in the following manner : 
He sees that the milk is properly weighed and tested for but- 
ter fat; he looks at the temperature of pasturization of the 
cream and the temperature of the cooling. He may get around 
at least once a week if the creamery is in its infancy. If it is 
a creamery that is known to be sound, he may drop in once or 
twice a month ; but even then he can tell if things are rimning 
properly because every day a sample is taken of that day's 
churning. The samples are not placed in a refrigerator but 
upon a table in the same room in which the churning is done. 
The organizer may come in 2 weeks, perhaps, from the time 
the samples are put there. He inspects each sample and it 
has got to be right and if it is not, he investigates and finds 
the cause. 

In the town where I live there is a proprietary creamery. 
It is a splendid creameiy and its owners are taking cream 
away from a large cooperative creamery located about 100' 
miles away. The reason they are getting the cream is be- 
cause they are paying higher prices for it than the cooperative 
creamery can afford to pay. The owners have the most mod- 
ern machinery; they know that the law says that they can put 
16 per cent of moisture into the butter; and they know in this 
day and age, a person has got to get what he is entitled to or 
he might as well close down. I strongly suspect that the co- 
operative creamery is so afraid that it will exceed the 16 per 
cent limit of moisture, that a good deal of the time the mois- 
ture is down to 13 per cent. That means it is losing 3 per 
cent at every churning. 

But in Ireland, the organizer looks after things like this. 
He goes in to the creamery and says: ''What is the matter 
that you are only getting only 14 per cent of moisture in your 
butter?" And the buttermaker shakes his head and says: 
''I don't know what the matter is but I can't get any more."" 
Perhaps it is a creamery that has been purchased from a pro- 



CHARLES A. LYMAN 45 

prietary company, and very likely the organizer will say: 
"Why, that is a very old churn. There is no use in trying to 
use it. We have had 60 cases like that in Ireland and we 
find that we can't get the msoisture in properly, but I know 
the churn that will do the trick." And because the farmers 
have confidence in the judgment of the organizer there will be 
a meeting of the board of directors and the proper churn will 
be installed forthwith. 

Right Kind of Organizer a Necessity 

All this has a bearing on my subject because it is in things 
of this nature that the most effective organization work is 
done — the things that will build up a strong cooperative or- 
ganization. As far as we are able, our organization is sup- 
plying expert advice. In Wisconsin (as is done in Ireland) we 
try to secure as organizers men who can not only go out and 
make an appeal direct to the hearts and consciousness of farm- 
ers, arousing them to the need for organization, but men who 
combine the ability to speak convincingly and effectively with 
business qualifications as well. In a dairy state an agricul- 
tural organizer should know something about how butter is 
made, and how to keep books. He must have sympathy and 
appreciate the limitations of the manager's knowledge. He 
may inspect a set of books and find that things are all wrong, 
but he has a different viewpoint from that of state Inspectors 
and auditors, who may say when things are tangled up and 
look badly: "Shut up. Close down." The organizer does 
not say that; he says: "Your books are wrong. They are 
in a bad mess. Now let us sit down here and see if we can't 
find where the trouble lies." He straightens things out. He 
knows how and has the disposition to do so. He says: "I 
know 50 places where they have a certain system of bookkeep- 
ing and where the managers never have any trouble. You 
should install their system here." He should go around to a 
place like that every week, perhaps, for a while, and he should 
stay with that man over night and work during the evening 
hours and teach him how to keep books. Over in Ireland 
they have done all of these things and the result is that there 
are a thousand odd societies in Ireland that are efficient and 
splendid. 

Some of these things we have done in a measure in Wiscon- 
sin. All of them we hope to do in the future. We have 450 



46 MARKETING AND FARM CREDITS 

local unions but about 70 only of these are incorporated. 
There are several reasons for this : one is due to the individual- 
istic attitude of the more prosperous farmers in the com- 
munity ; the other is due to the failure of so-called cooperative 
activities in the past. 

Why Organisation is Difficult 

"We are all familiar with the individualistic type of farmer. 
We have had a country of vast undeveloped resources. Men 
have said to themselves: "I did not plan to be a farmer. 
My father was a lawyer and my grandfather a judge ; but I 
believe if I get this piece of land, even if I don't know much 
about farming, I can at least hang on to it. I can get it cheap 
and I will do just as my uncle did in Ohio, — if I keep it long 
enough I can sell it for $150 an acre." I don't know how 
many of that class of farmers we have in Wisconsin, but I do 
know that in every township in the southern half of the state 
we find men of that character. These men have made their 
money not so much in the growing and selling of their crops 
as in the rise of value of their holdings, and the result has been 
that these people do not appreciate the situation in which the 
newer settlers find themselves, who must pay high prices for 
their land. This "selfmade" farmer is apt to say: "Why, I 
made good. Let the other fellow do the same." Quite fre- 
quently he is the chairman of the town board or one of the 
supervisors or holds some other position of influence in the 
community. Such men frequently are opposed to cooperation. 
They often injure it by the use of a shop-worn but effective 
stock phrase: "Cooperation is foolish, — it Avon't work." 

The second reason why it is difficult to incorporate as legal 
entities, as already stated, is because certain farmers organiza- 
tions started 40 or 50 years ago to do certain things cooper- 
atively without knowing the economics of cooperation. They 
had not heard about the Plunkett House organization in Ire- 
land; they had not heard about cooperation in Denmark and 
Germany, and the Eaiffeisen and Landwirtschaftsrat and the 
Schulze-Delitzseh. They went ahead bravely, blindly and made 
heroic mistakes. When I helped to organize an Equity local 
in Wisconsin, I tried to get my grandfather to join. He re- 
fused on the ground that he had lost several hundred dollars 
in a "cooperative" creamery, and some more in the Farmers' 
Alliance. He wouldn't listen to me at all. Do you know any- 



CHARLES A. LYMAN 47 

body like that where you live? Of course you do. The kind 
of cooperation my grandfather knew was the cooperation that 
blazed its way across the continent, shot Indians from wooden 
forts, hewed down forests, and gathered together adventurers 
in caravan trains to cross the plains and deserts to California 
in '49. But the business cooperation our forbears knew was of 
a more hybrid nature. Any sort of a business arrangement 
could be called cooperative and this was true up to the year 
1911 in Wisconsin when we secured our cooperative law. We 
now have a one-man one-vote proposition and no longer is it pos- 
sible for the owner of 10 shares and one cow to out-vote the 
farmer owning 10 cows and one share. 

I could tell you a good deal about our difficulties in Wis- 
consin and of our successes. I have a number of letters with 
me that I have received during the past 2 or 3 weeks from 
friends of mine, from managers of cooperative companies, 
livestock shipping associations and so forth. Time will not 
permit me to read them to you, but I have a half a dozen here 
that would absolutely stir you up to the need of agricultural 
cooperation, — letters that tell about the conditions that existed 
before the farmers organized; before the Equity came in, and 
before they organized and incorporated and before they could 
get their agricultural requirements at wholesale or could ship 
out their livestock and other products at a living price. I 
haven't time to go into this matter except just to mention it 
to you and to tell you that there is that feeling in Wisconsin. 

We are not a fraternal or secret organization. According 
to our constitution and by-laws, anybody who says he is in- 
terested in agriculture may join. We know in a movement 
like ours there are always the disgruntled, the idealists, the 
dreamers and the fellows with queer ideas ; and some of those 
people have come in. A farmer is not alwaj^s as discriminat- 
ing as he might be and sometimes he is carried away tem- 
porarily by unsound arguments put forth in orotund and 
pseudo-eloquent phrase by the camp followers and the hangers- 
on. We have got to bear this in mind, and it will take time 
and patience before we can get our entire membership think- 
ing along lines that will be entirely free from the criticism of 
the impartial observer. I know some people say that it is 
hard to organize the farmer; that it cannot be done. But we 
know that it has been done in other countries and is being 
done in the United States. The bureau of markets and rural 
organization at Washington has estimated that the total turn- 



48 MARKETING AND FARM CREDITS 

over of agricultural cooperative organizations in 1915 will 
have amounted to $1,500,000,000. 

Development of Packmghouses 

The packing plant proposition is a later phase of cooperation 
on a somewhat larger scale. This is the way the movement for 
a farmers' cooperative packing plant started. A standing com- 
mittee on cooperative packing plants was appointed at one of our 
national conventions. This committee investigated several prop- 
ositions in "Wisconsin, and finally recommended that Wisconsin 
was ready. for a cooperative packing plant and urged that steps 
should be taken to establish one. 

A number of us thought that the farmers were not ready for 
such an undertaking. We felt that we did not have enough lo- 
cal activities incoi'porated, and had not yet developed sufficient 
business ahility to carr\' on an undertaking of such magnitude. 
Nevertheless, the sentiment was so strong for the inidertaking 
that in 1913 our st<ite convention endorsed tentatively the propo- 
sition of incorporating a packing plant. The national packing 
plant committee, together with other farmers, had made up their 
minds to buy an established concern in the western part of Wis- 
consin. With the best of motives, undoubtedly, they went ahead 
and secured it. Some of the national officers were connected 
with the selling of the stock on a commission basis. 

Many of us felt at that time, and still feel, the impropriety of 
such a proceeding. Testimony has been given at different times 
showing that the commissions to be realized by the promoters 
ranged between 20 and 30 per cent on certain blocks of stock. 
At one of the investigations held at the state convention last 
year. Dr. Charles McCarthy, who is a member of our organiza- 
tion, was asked to give his opinion concerning the ad\"isability 
and propriety of officers of our organization engaging in such 
enterprises. In answer he said it was quite contrary to the true 
spirit of cooperation to give commissions of any sort; that if 
there were a demand for cooperative packing plants, the farmers 
would subscribe the stock without paying large commissions to 
promoters. 

At the state convention strong resolutions were passed con- 
demning the promotion methods employed and questioning the 
X^ropriety of oiu* officers in engaging in matters of this character. 
We have never accused anyone of dishonesty in the selling of 
this stock ; but we think that the men in question have not dem- 



CHARLES A. LYMAN 49 

onstrated themselves ta be good, sound business men in the eon- 
duet of the affairs of the first cooperative packing phint. We shall 
oppose such practices in the future unitedly as an organization, 
and we trust that we shall have so strong an organization, ment- 
ally and morally as well as physically, that we shall be able to dis- 
criminate between proper and improper methods, call in expert 
assistance if necessary, know whether a proposition is sound or 
not, and likely to succeed ; and if we think that it is not legiti- 
mate, we hope to be so strong and our word so good, that the 
farmers of our state will listen to our organization if we sound a 
warning, and be guided by our counsel and advice. 

What Wisconsin Hopes Cooperation Will Do 

I have given you a few of the principles that underlie the 
movement for agricultural cooperation in Wisconsin. We on 
the firing line are fervently hoping that the general public will 
accept them, and that they will prevail. Ours is a movement 
of the masses in agriculture^ — the farmers who farm their farms, 
and from whom the city housewife directly or indirectly gets 
her food. It is a movement that aims not to raise the cost of 
living to a single householder, but to get only a profitable re- 
turn, to cut out waste and to employ modern business methods. 
It cannot promise to reduce materially the cost of living because 
that rises higher from year to year, due to many factors not 
coming under this discussion ; but the application of the coopera- 
tive principle to the farming business wiill raise decidedly the 
quality of farm produce. In Denmark butter, eggs and bacon 
are sold with a positive guarantee as to quality and excellence. 
These same conditions will some day obtain here. Agriculture 
alone of the great industries remains practically unorganized. 
The Society of Equity is striving to do for its members and for 
the farmers of the state the things that in other fields of endeavor 
have called forth the activities of industrial and commercial 
leaders. The production end of agriculture has been taken care 
of by our agricultural colleges and farmers' institutes, until in 
that direction there is little to be desired. Our field is that of 
securing for the average farmer a fair return on his investment 
and labor — one commensurate with the long hours and arduous 
toil that he performs. 

We are hoping that a new light will burst forth from our seats 
of learning, — an appreciation of the difficulties with which the 
average farmer ds confronted. Already we see the department 
4— M. F. c. 



50 MARKETING AND FARM CREDITS 

of agriculture at Wasliiugton broadening out in its policy to- 
Avards associational effort. The fact that at this conference 17 
of our states are represented by the heads of marketing depart- 
ments, lends encouragement to our cause and makes us look for- 
ward to the day when the state and the self-help movement will 
work in perfect harmony and with mutual benefit. 



PUTTING COOPERATION ON A BUSINESS 

BASIS 

E. M. TOUSLEY 

Without question unless cooperation is put upon an efficient 
business basis it can never become permanently successful in the 
United States or elsewhere. The changes have been ning on the 
slogan "Better Farming, Better Business, Better Living,'' but 
I desire to introduce a. new slogan at this time for cooperators, 
namely, "Capitalize, Patronize, Supervise," as the essential feat- 
ures in putting cooperative organizations on a business basis. 
There are many important points whicli should be touched upon 
in treating this subject but time will permit me to call attention 
to only a few whicli properly come under the head of these 3 
divisions. 

Associations Must "Capitalize" 

Every cooperative enterprise must, of coui*se, be properly cap- 
italized if it expects to be either temporarily or permanently 
successful. Innumerable failures of such enterprises in this. 
country may be traced directly to an inadequate working cap- 
ital. Many times have I been told by officials of cooperative as- 
soeaations that their farmer members, while Avilling to contribute 
sufficient money for the purchase of an elevator or other house 
in which to do business, refuse to furnish additoinal or working 
capital with which to conduct the business properly. This on 
the theory that the money put into a building can be seen and 
not blown away or stolen, while the capital necessarv^ to conduct 
the business they refuse to contribute for fear it will be lost. 
This, of course, simply indicates complete lack of confidence 



E. M. TOUSLEY 51 

in themselves, the officers they elect, and the cooperative system 
of transacting business. 

First let us take a glimpse of what constitutes a *' cooperative 
system." Does the simple assumption of the ownership of a lo- 
cal elevator, store, creamery, or other enterprise constitute a 
system? Decidedly not. The organization of a cooperative as- 
sociation to operate any local enterprise is but the first step in 
the building up of a cooperative movement. From the local 
units, when a sufficient number have been brought into existence, 
should be formed terminal associations for the agricultural sell- 
ing associations, and the ownership of wholesale houses and 
other machinery of distribution for the consumers. When this 
secondary step shall have been taken, the next step, that of manu- 
facturing, should also be undertaken. When the responsibility 
for the ownership and successful operation of these various de- 
partments of a " cooperative system ' ' shall have been assumed by 
the people, then and then only may it be called a "movement" 
and be in position to compete successfully with the business 
world. On the contrary, if one set of cooperators own and oper- 
ate the primary units, and other sets own and operate the other 
departments, there is no "system" or movement, and there will 
be eternal clash and chaos between these would-be cooperators, 
and no real progress can be made. While this statement of the 
case may be very inadequate, I have tried to present to you the 
efficiency of the Rochdale plan of cooperative distribution and 
its antithesis, the American plan. 

On the Rochdale plan the consumers, wage earners, farmers — 
we are all consumers — own, and, through their duly elected rep- 
resentatives, operate the local cooperative store, or local unit, 
whatever it may be ; these store societies, through their duly 
elected representatives, own and operate their own coopera- 
tive wholesales; these cooperative wholesales through their vari- 
ous committees and departments, own and operate their own 
manufacturing establishments, and also, to a certain extent, their 
own agricultural productive enterprises. With this perfected 
chain system, British, as well as other European cooperators, are 
enabled to free themselves from the domination of the middlemen 
profit-takers, and to save to themselves practically one-fourth of 
the cost of living. We American cooperators have evidently lost 
sight of the fact that cooperation means the building up of a 
complete system. Our English friends are continually remind- 
ing us of the fact that w^e Americans are always putting "the 



52 MARKETING AND FARM CREDITS 

cart before the horse". Persistent attempts are being made in 
this country to organize and operate large terminals, wholesale 
houses, packing plants, factories, etc., cooperatively, before any 
provision whatever has been made for a cooperative outlet for 
their products. It would be as practical to start a clothing fac- 
tory for "the man in the moon". The cure for the ills and fail- 
ures of cooperation everywhere is "more cooperation". Hav- 
ing disposed of the "system" phase of the cooperative move- 
ment let us turn for a few moments to the consideration of the 
business basis upon which local cooperative companies should be 
founded and operated. 

Association Members Must "Patronize" 

After the membership of a cooperative enterprise shall have 
furnished a sufficient amount of working capital the next im- 
portant point which affects the institution on its business side 
is that of loyal patronage. No cooperative enterprise can 
expect to be successful unless it shall first have within its own 
membership a sufficient volume of patronage first to pay the 
necessary operating expenses and leave a balance in the profit 
account to pay share dividends, or interest on capital, and in 
addition thereto, when conducted upon the same price level 
as competing institutions, a sufficient saving to pay some 
patronage dividends. To most minds there is no other reason 
for its existence. 

The cooperative company must have been organized in the 
first instance with this particular object in view. If organ- 
ized with too small a group of members, with the avowed ob- 
ject of making profits off from the trade of non-members, it is 
not cooperative in spirit or character. It follows then that a 
truly cooperative association must depend upon the loyal 
patronage of its members in order to succeed financially. 
This is so obvious as to be self-evident Per'haps no factor has 
been more prolific in causing the failure of cooperative con- 
cerns than this one of the disloyalty of its owm stockholders. 

' ' Supervise ' ' — That Is Essential 

Under the head of proper supervision comes the whole ques- 
tion of careful, frequent and efficient auditing, as well as the 
spirit and acts of officers, managers and employes. Let us 
consider these in the order of their importance. 



E. M. TOUSLEY 



53 



First — elect officers. A cooperative association is distin- 
guished from all other business corporations by its thoroughly 
democratic vote — one vote per member or stockholder regard- 
less of the amount of capital invested or shares held by each. 
Stockholders should choose honest, successful members to be 
directors and officers of the company. If such are already on 
the Board, re-elect them, not only as a reward of merit, but 
because they can bring greater business success by reason of 
their experience. Passing important positions around as a 
compliment to friends is poor business policy. Rejecting a 
good director on account of personal "spite" is even a worse 
business practice. 

One of the great weaknesses of cooperative enterprises 
among farmers is that of the lack of business training and 
stamina among its officers. I do not mean by this the lack of 
business knowledge alone. Very often a farmer director may 
know what should be done by the manager or other employes 
to make the business more prosperous, but fails to insist that 
the proper changes be made, and be made at once. It goes 
without saying that officers of a cooperative company must be 
enthusiastic cooperators and men who have made successes of 
their own business ventures with enough back bone to call a 
spade a spade at the right time and place, and to insist upon 
the instructions of the board being rigidly carried out by 
employes. 

Doing Business on a Cash Basis 

No enterprise may be said to be either cooperative or upon 
a sound business basis unless its dealings are conducted upon a 
basis of cash or its equivalent. Credit is a curse alike to those 
who give it and to those who receive it. Discussion on this 
point seems useless from the viewpoint of a eooperator, so I 
refrain from further comment. 

What Is Auditing? 

What is auditing? Would you call it effective auditing for a 
committee of 2 or 3 inexperienced members of a cooperative 
association to go over its books and the annual report of 
the manager, after the year's transactions have been closed, 
footing the columns to see if there are any mistakes in addition,, 
and going over a few vouchers to ^Verify some of the entries 
and the report? I would not. After many years of expe- 



54 MARKETING AND FARPI CREDITS 

rience in organizing and advising with cooperative store com- 
panies, and other enterprises, I am firmly convinced that an 
honest, ellficient and fearless audit must be made of the trans- 
actions of the business of cooperative institutions, each and 
every month of the year, by an impartial expert, and their 
business errors, failings and shortcomings called to the atten- 
tion of the manager and officers while the business is being 
transacted. Auditing the books but once a year, in most eases, 
is identical with "locking the barn door after the horse is 
.stolen." 

The monthlj' reports and auditing should show, among other 
things, the amount of business transacted during the current 
month compared with the same month last year; the total 
amount of business transacted from the beginning of the year 
.to the date of the monthly audit, compared with the record of 
.the company for the same period the previous year; total in- 
-debtedness ; total capital stock ; total undivided earnings ; total 
notes on hand; cash on hand and in bank; discounts taken; 
average monthly sales; operating expenses; percentage of sal- 
aries and other operating expense in proportion to the total 
volume of business ; dividends paid, etc. With this information 
coming to the stockholders every month in the shape of a bul- 
letin placed in a conspicuous position in the store or other place 
of business, confidence will be established, the members will 
patronize the institution more loyally, new members will gladly 
join and a sufficiency of capital will be offered by the people, 
.<ind the volume of business will be so increased as to make its 
'transaction much more economical. Such an arrangement also 
^distributes responsibility. As one farmer expressed it, when 
this plan was explained to him: "If we go 'bump,' we will do 
it with our eyes open." One thing but few members of coop- 
erative organizations realize, and that is that the size of the 
' dividends paid them each year is not the measure of the success 
tof their business enterprise. The one true measure of success 
:is arrived at by knowing at what rate of gross profit on the 
doilar the business is transacted, then subtract from this the 
per cent of operating expense showing the net earnings on 
each dollar of business transacted. If the company is oper- 
ating its business on a 20 per cent gross margin, and it costs 
9 per cent to do business, the net earnings will be 11 per cent, 
and a patronage dividend, in excess of 11 per cent, may be paid 
the stockholders, after providing for reserves and surplus, by 
reason of the one-half profits accruing to the general profit ac- 



E. M. TOUSLEY 



55 



«ount of the company from the trade of non-members, whereas, 
if the same company transacted its business at a gross profit 
of 25 per cent, with an expense element of 14 per cent, the net 
earnings would still be 11 per cent, and the same sized divi- 
dend could be paid to the stockholders, but all patrons, stock- 
iolders and non-stockholders alike, would have paid 5 cents 
more on every dollar's worth of their patronage, and been out 
of pocket just that amount. 

What Publicity Really Means 

It is self-evident that the rank and file of the membership 
must be educated in these business principles in the practical 
workings of a cooperative association. It is also considered by 
those who know best and who have had long years of expe- 
rience, that the exact financial and other conditions of a co- 
operative organization must be frankly made known to its 
stockholders as the business proceeds. In no other way can 
their confidence be secured and maintained. Without confi- 
dence there is nothing to build upon and retrogression sets in. 

Business acumen in the operation of cooperative enterprises 
at the present time would indicate a proper amount of adver- 
tising for both educational and business purposes. All that 
has been said and written by advertising advocates and ex- 
perts, of the value of advertising to private business, will ap- 
ply, to a certain extent to cooperative business also. In so far 
as the meetings of the members of cooperatives and a spirit of 
loyalty may take the place of a part of this advertising in dis- 
seminating knowledge, a portion may be dispensed with. 

All these essentials require the proper supervision in order 
to put cooperation on a business basis in this country. It may 
be a long road and it may "take well through the present cen- 
tury," as another has said, but unless the rank and file of the 
people unite in sufficient numbers to "Capitalize, Patronize 
and Supervise" their own cooperative business institutions, 
just so long will they continue to suffer from the evils of the 
system opposed to this program. 

How most effectually to educate to, and install and apply 
the business methods herein mentioned, and many others, is 
the practical problem confronting those in the American co- 
operative movement. After more than 10 years experience 
with the whole of my time devoted to the study and practice of 
the method best adapted to American conditions, this experi- 



56 MARKETING AND FARM CREDITS 

ence covering the organization and detailed operations of over 
200 cooperative associations, with 3,000 stockholders, with an 
average investment of nearly $200 each, I am sure in the 
opinion that only by the formation of a National Agricultural 
Organization Society to propagate associations to cooperatively 
standardize and to market farm products, and to buy the 
coarser farm supplies for the producer end of the movement, 
while for the consumers' distributive and industrial end, there 
must be a national cooperative union, democratically' con- 
trolled, through which local cooperative associations miay be 
formed and properly guided and united. 



THE RAILROAD AND THE COOPERATIVE 
MARKETING SOCIETY 

R. W. HOCKADAY 
General Industrial and Agricultural Agent, M. K. & T. Ry. Co. 

It is assumed that you desire me to tell you something of 
the interest the railroads are taking in cooperative marketing 
and of our personal interest in improving marketing conditions 
for our producers. 

The representatives of American railroads have undoubtedly 
given more thought to this subject than any other one interest 
— except the producer, and have only failed in accomplishing 
more definite and satisfactory results because of lack of proper 
support from the other essential agencies. The producers them- 
selves have failed in many cases to adopt suggestions made 
to them with promptness and have not been properly organized 
for proper satisfactory production of high grade articles, nor 
have they carefully considered and acted upon the necessity 
for standardization of pack, as to quality, grade and package, 
and packing for transit. 

High grade product in proper package sells itself; the 
trouble lies with culls, low grades and mixed shipments. Con- 
sumers buy with the eye and are quick to appreciate uniform 
high grade product and are willing to pay for such food a price 
remunerative to the producer. They demand that culls and 
mixed grades be sold at reduced prices. 



R. W. HOCKADAY 57 

On the M. K. & T. Ry. we have worked for several years 
with our growers to get them to understand and appreciate 
the necessity for and advantage in organization. I am sorry 
to have to say that we have failed to accomplish the organiza- 
tion of very many satisfactory associations. 

An organization is absolutely necessary for proper market- 
ing of perishable products; for the many questions arising in 
community shipping of such products can only be handled 
satisfactorily through an organization. There must be some 
central body im each producing section to whom suggestions 
can be made and which will undertake to see to it that the 
growers comply. Through this same channel can be dissemi- 
nated information regarding available buyers and markets. 
Local inspection and at important gateways can be arranged 
for jointly at a minimum cost to the individual which is not pos- 
sible where growers are acting independently. An organized 
effort to obtain federal aid in marketing will accomplish re- 
sults which the individual could not hope for alone. 

Why the Consmner Pays for Quality 

Production of high class articles and proper packing, in- 
spection, etc., necessarily advance the cost to the producer, but 
the increased returns justify the expense, and the product can 
be sold, which is not the case with low grade or mixed prod- 
ucts. 

It is difficult to persuade the average farmer producer that 
he can better afford to pay $5 per day for an experienced 
packer than to give an inexperienced man $1 per day. It is 
hard to convince him that he cannot deceive the consumer who 
buys with his eye, and that this consumer will always give 
preference at increased cost to the product which is uniform 
in quality, size and package; yet he does and he will continue 
to do so as long as different grades are offered for sale in our 
markets. 

It is our deduction that the producer is himself responsible 
for prevailing conditions. He could establish the price and 
control the situation if he would. He does not try as he 
should. The average producer gives thought only to produc- 
tion in quantity and makes no effort to improve quality or 
make his product attractive to the purchaser. The few who 
do are in so small a minority that in most districts they are 
not able to market their product to advantage either Individ- 



58 ' MARKETING AND FARM CREDITS 

ually or collectively because of their necessity for shipping 
with careless growers whose poor product reduces the value 
of their higher grades. 

The railroads have been requested by growers to take buy- 
ers into producing sections to purchase f. o. b. track. Buyers 
have gone to these sections and made purchases at satisfactory 
prices, to find their market flooded by growers from the same 
district who shipped their product under consignment, creat- 
ing a loss for everyone. 

Our growers seem only to know 3 markets — St. Louis, Kan- 
sas City and Chicago. They ship to these points a daily 
surplus which establishes a price far below that for which 
could be sold an adequate supply for that city. Buyers from 
other cities make their purchases in these 3 overstocked low 
priced markets. The grower loses, but he charges his loss 
not to his ow'n lack of intelligence in handling his product 
but to the commission men. The growers who ship to these 
markets in this way are themselves responsible for the condi- 
tions created. 

Railroads Willing to Aid Cooperatives 

The railroads have tried with sincerity of purpose to assist 
producers in obtaining better prices for the principal reason 
that they want the farmers to prosper. Prosperity of the 
farmer means general prosperity of the banker, merchant and 
railroads. It is for this principal reason the railroad repre- 
sentatives make their investigations and recommendations. 
The railroads have another smaller but important interest in 
the proper packing and inspection of perishable products. 
They are generally called upon to pay claims on shipments 
which are improperly loaded at points of origin or refused at 
destinations. Many shippers insist upon collecting their losses 
from the railroads. They often fail but their intention is 
shown. Eailroad claim departments after experience extend- 
ing over many years are able to determine the responsibility 
for damage and loss and payments are naturally declined 
when the railroad is not at fault. Inspection by railroad men 
is becoming more general and rigid. Records are kept of 
shipments rushed in packing and unloading, and when weather 
conditions are unfavorable, to avoid payment of unjust claims. 

On the M. K. & T. Ry. we believe organization is essential 
and we are strongly recommending to oui" growers that they 



GIFFORD PINCHOT 59 

organize, for the purpose of producing high-class products, 
for purchase of their packages, for inspection, for shipping 
and for sale of their products. We believe that if we can pro- 
duce a standard grade, packed in uniform package, that an 
increased and satisfactory price can be obtained in the markets 
or at points of production. We also believe firmly in the value 
of the aid to be derived from the federal bureau of markets 
and hope the time will soon come when this department will 
be able to place its representatives in the principal producing 
^sections and at each of the important gateways through which 
shipments move. 

When there are organizations to which reports can be made 
;and there are federal agents to make reports, the growers 
can be kept in daily touch with available, open, 'unsupplied 
markets and there can be a more general intelligent and 
proper distribution of perishable products. When the grower 
furnishes a standard pack of uniform grade and quality the 
buyer will cheerfully pay a price to justify the labor and ex- 
pense incident to this kind of production, and the grower "will 
make more money; the buyer will be better satisfied and better 
fed. 

Our representatives can be counted upon as engaged in an 
effort to accomplish these conditions in territory served by the 
M. K. & T. Ry. and we propose continuing our work until defi- 
nite results are accomplished. 



RELATION OF CONSERVATION TO AGRI- 
CULTURAL COOPERATION 

GiFFOED PiNCHOT 
Former Chief Forester 

Conservation may be defined as the wise use of the earth 
for the benefit of the people who live on it. Now, if that is 
true, there is no one who is more concerned with the conserva- 
tion policy and principle than the farmier. The natural re- 
sources which are the objects of conservation are as a matter 
of fact the raw materials of human safety and comfort and 
prosperity. The houses we live in, the barns our stock occupy, 
'Our fences, our clothes, our food; all these things are simply 



60 MARKETING AND FARM CREDITS 

natural resources transformed to the use of man. And the 
farmer has as keen an interest and has manifested as keen an 
interest in this conservation as any one — in the price of coal^ 
in the price of timber, in the price of the metals, in the price 
of the thousand and one things that he must use. The conser- 
vation policy, which in a very real sense is the cost of living 
policy, comes straight to him, and I have had the very pleasant 
experience over and over again when we were in a tight place 
on conservation of going to the farmers' organizations and 
getting from them sympathetic and understanding help, be- 
cause they know what this thing was all about. 

Two Sides to Conservation Policy 

There are 2 sides to this conservation policy just as there 
are 2 sides to the big farm question that we have been dis- 
cussing here. And one of them everybody agrees to : when 
the conservation policy first became a subject of public discus- 
sion it took almost no time at all for it to become established 
in the public mind that, of course, natural resources ought to 
be wisely handled. Before the thing had gotten fairly 
launched, within a few months of the time when it was first 
broached, it was then and has continued to be now almost as 
difficult for any public man to say that he did not believe in 
the conservation of our natural resources as to say that he did 
not believe in the Ten Commandments. The general policy 
was accepted by everybody. "Of course, use our resources 
wisely ; save the timber, protect the coal from waste ; develop 
the water power wisely, and above all conserve the fertility of 
our soil." Right there is perhaps the biggest single conserva- 
tion problem, in its influence on the whole country, that we 
shall ever have to tackle. Everybody was for all those things, 
but the general smiling consensus of opinion that conservation 
was a good thing did not last very long after we began to say,. 
' ' Yes, let 's conserve all these natural resources, but who is go- 
ing to get the benefit of that conservation 1 ' ' And the minute 
that question came up there was war to the knife, and the 
knife to the hilt, and that war is not done yet. That is what 
the conservation fight is about, on the question of whether we 
shall save our forests and our water power and the rest of it — 
who is to get the benefit of that saving? Shall the benefit go 
in a fair and decent manner to all the people, just as widely as 
possible, or shall the comparatively few do in the future as 



GIFPORD PINCHOT Ql 

they have done in the past — skim the cream and give the 
skimmed milk to the public? 

Fighting the Anti-Social Interests 

I want to tell you that there is going to be this year an effort 
to force through Congress, against representatives of special 
interests, bills that are in the public interest in this matter. 
You have been told in the newspapers by the men who are 
^fighting the conservation policy, over and over again, that con- 
servation hinders development. I want to tell you that the 
men who have fought development through conservation year 
in and year out have been the men who prefer not to have good 
bills passed — prefer to remain under the bad situation which 
-we face now rather than to have good bills passed. They tell 
you that conservation men held up development of coal in 
Alaska and yet for nearly 10 years we tried year after year 
to force through Congress in the face of the representatives of 
the Guggenheims and otihers the development bill which finally 
passed last year. The proof that that was a fairly reasonable 
proposition is that it was adopted last year by the Congress 
of the United States in spite of the opposition. 

We have been trying year after year to force through the 
Congress of the United States a bill which shall recognize that 
the water powers of this country, belonging now to the people, 
ought to continue to belong to the people, and ought not to 
l>e handed over forever and for nothing to a lot of big special in- 
terests — the water trust which is now forming. 

We are going to have that fight again this winter. 

These men year after year have blocked the passage of that 
l)ill as they blocked the passage of the Ferris bill last year. 
We are going to have that fight up again this winter and I 
think we will put that bill through in spite of the representa- 
tives of the water power interests who are already in Wash- 
ington and who are going to stay there through the session. 
This fight, gentlemen, is not a fight for anything but just this : 
to see that the natural resources that God put on this continent 
of North America shall mainly go to the people of the United 
States and not to a few men who are plenty rich enough right 
now. 

I want your help. We not only want but we need your help 
to fight this fight through. It is going to be fought through, 
and it is going to come out in the right way. 



62 MARKETING AND FARM CREDITS 



Conservation a Farmer's Problem 

Conservation is the farmer's problem as much as it is any- 
body's problem The farm question divides exactly along the 
2 same lines with the general conservation problem itself. 
For years everybody in this country has been in favor of in- 
creasing production on the farm, and everybody ought to be. 
It is the "vvise and right thing to have happen. "We have spent 
more money on that thing in proportion to our population — 
I don't know how many times, more than any other nation' 
in the world. "We haven't got all the results quite, yet, but we 
have spent the money, at least. 

"We ought to have bigger production on the farm, and we 
are going to get it, but there remains behind exactly the same 
question as in the matter of the general conservation policy: 
for whose benefit mainly is the increase of production on the- 
farm to be? 

Now, if it is true — I have heard it said a great many times,, 
and so have you — if it is true or even in the neighborhood of 
the truth that the man on the farm gets only about half of the- 
money that the consumer pays for the farm products that ap- 
proximately half of the money on the way from the consumer 
to the producer drops out here and there along the road then 
there is a huge waste, and as long as that waste continues to 
be there it is obvious on the face of it that the man whose pro- 
duction has increased on the farm is not getting the benefit 
that he ought to get, is not getting his fair share of the benefit 
that he ought to get out of the better methods of farming. 

This country consists of consumers and producers. Every 
man is a consumer and every man is a producer, or, every man 
ought to be a producer. If each now shares in the loss from' 
the waste, each ought to have his share in the repair of the waste. 
And as I understndt it in its true aspect, the work that this 
conference has come here to take up is the question of so han- 
dling farm produce by a wise production, by standardization, 
by better methods of distribution, by better methods of faru> 
credit, by the general organization of the w^hole business on the- 
farm so that this gigantic waste which now exists shall be elim- 
inated, partly for the benefit of the farmer; partly for the bene- 
fit of the consumer; partly, also for the benefit of the men 
Avho ought to be benefited — and some of them ought not to be — 
who stand between the farmer and the consumer. 



GEORGE W. SIMON 63 

I see no larger problem connected with agriculture in the 
United States than this We may have all the better farming 
you like on the farm, but until we have, in the language of Sir 
Horace Plunkett, better business on the farm as the first step 
toward better living on the farm, we shall only have used a 
very small part of our opportunity. I see this thing as the big- 
gest thing that can be done for what is fundamentally the most 
important part of the population of this country, and I con- 
sider it a high privilege to come here and get a chance to say 
this to you and to add that I hope in the future, as I have tried 
in the past, to do what little I can to help this work along. It 
is more worth while than any other thing that is to be done 
for the man who lives on the land in the United States. 



THE WORK OF THE JEWISH AGRICULTURAL 
AND INDUSTRIAL AID SOCIETY* 

George W. Simon 
Western Agent 

In discussing rural credit and rural cooperation, or rural 
progress in general, the average investigator or student of 
economics turns his attention to what is being done in Europe, 
Africa, New Zealand, or elsewhere, and is either unaware of, 
or he ignores entirely, what has been accomplished in this 
country. In fact, the European stamp of approval seems to be 
necessary on everything — from tenors and sopranos to cotton 
and potatoes — in order that it may gain popular favor here. 
Our American young men and women must first go to Europe 
to get their recognition and trade mark. Our cotton must first 
go to Europe to be worked in the mills there, and then be re- 
imported into this country in the form of woolen material. 

In the matter of rural credits there are some who firmly hold 
that, our people being different and conditions here being dif- 
ferent, we can not transplant to this country the European 
rural credit systems ; that it is impractical and even impossible. 
It might be of interest, therefore, and to some, even a revela- 

* Delivered before the second National Conference on Marketing 
and Farm Credits at Chicago, in April, 1914, in joint program with 
the Western Economic Society. 



64 MARKETING AND FARM CREDITS 

tion, to learn that here in the United States the French Credit 
Fonder system, or long-term rural credit, has been in operation 
for the past 24 years, while the German Raiffeisen system, or 
short-term rural credit, was established in this country in 1909, 
and has been in actual operation since 1911. This work has 
has been done under the auspices of a philanthropic organiza- 
tion, subsidized by the Baron de Hirsch Foundation, namely the 
Jewish Agricultural and Industrail Aid Society, with which I 
have the honor of being identified. 

The Jew, as a class, has always been identified with com- 
merce and finance. Our experience has shown that by applying 
the same business principles to farming, he can make farm- 
ing pay in spite of the many drawbacks he has to overcome. 
There are now in the United States about 7,000 Jewish 
farmers. A few years ago our society estimated that the 
3,718 farmers with Avhom we came in personal contact own 
437,265 acres of land worth, approximately, $22,194,335, 
with an equipment worth $4,166,329. 

A Fund to Lend Money to Jewish Farmers 

The Baron de Hirsch fund was established in 1890, and 
from its inception has made loans to Jewish farmers in the 
United States at a moderate rate of interest and upon easy 
terms of repayment. The great increase in Jewish immigra- 
tion to this country naturally increased the demand upon the 
activities of the fund, and new and more urgent problems 
arose. 

In view of the growing importance of the agricultural phase 
of the activities of the fund, the board of trustees found it 
necessary to create a special organization for that purpose. 
Accordingly, in 1900, the Jewish Agricultural and Industrial 
Aid Society was incorporated. The chief object of the so- 
ciety is to render financial assistance to Jewish immigrants 
who wish to become farmers, or to enable those who are al- 
ready on farms to maintain their foothold. In view of the 
fact that our resources are limited, we do not, as a rule, make 
loans on first mortgages, but on second, and even third and 
fourth mortgages, supplemented sometimes by a chattel mort- 
gage or other collateral security. Loans are made either to- 
wards the purchase of a farm or its equipment, or both. 
Loans are like^^dse made to those already on the farm to en- 
able them to make improvements, to buy additional equip- 
ment or for like purposes. 



GEORGE W. SIMON 65 

During the 14 years it has been in existence, our society 
has granted, in round numbers, 3,000 loans, aggregating 
$2,000,000. The loans are made at 4 per cent interest, on 
long-term mortgages, running on an average for 10 years. 
The terms of repayment are based largely upon the ability 
of the farmer and the earning capacity of the farm. The 
character of the farmer is taken into as much consideration 
as the real estate security. The proof of the soundness of our 
experiment is that, in spite of the inferior security which we 
accept, our losses, during the 14 years, were less than 21A per 
cent, and the repayments, 30 per cent. The payment to the 
society for the fiscal years ended December 31, 1913, amounted 
to $100,091.04 on the principal, and $30,292.18 in interest. 

Doing a National Work 

Our society made loans in 32 states and in Canada, thus our 
operations cover a much wider territory than that of all the 
European land credit banks combined. It proves that the 
rural credit system is practical and adaptable in every state 
of the Union. The time of free land being past, land is now a 
good security, provided we have good farmers on it. I be- 
lieve that land is worth as much as the^ man who is on it, and we 
do have some good men on our farms. 

Our experience has shown that, after receiving loans on 
second and third mortgages on easy payments, our farmers 
were stiU struggling against trying difficulties. There arose in 
our rural districts a new class of money lenders, who gradually 
preyed upon the farmers until they had them completely in 
their power. Sometimes they are the local storekeepers, 
sometimes ''just neighbors." Like the hookworm prevailing 
in the South, these money lenders infest the body of our 
farmers and sap all their energy and strength. To free the 
Jewish farming communities from these parasites, we de- 
cided to organize among them cooperative agricultural asso- 
ciations, by means of which the farmers could help one an- 
other. 

Pioneers in American Rural Credits 

Since 1910, when Ambassador Myron T. Herrick reported 
to President Taft upon the progress of rural credit in Europe 
and pointed out the comparatively abnormal conditions in 
the United States, the country is almost daily discussing 

5— M. F. c. 



66 MARKETING AND FARM CREDITS 

this problem, and there is hardly a periodical which has 
not had an article on the subject from time to time. In 
1907, when our society first tackled the proposition, there 
was very little information on the subject. After consider- 
able study, our general manager, Mr. Leonard G. Robinson, 
arrived at the conclusion that the Raiffeisen system offers the 
best solution of the problem of short-term loans, and in 1909 
he devised a modification of the German system to meet the 
demands of our farmers. A» pioneers in the field, we natur- 
ally encountered many obstacles, chief among which was the 
absence of legislation under which these credit unions could 
be incorporated. We finally concluded to organize them as 
unincorporated or voluntary associations, and in May, 1911, 
the first cooperative bank on American soil was opened. 

It was not very difficult to introduce these credit unions 
among our farmers, for we had already organized the farmers 
into local groups or societies. This we succeeded in doing 
through the activity of our educational department which is- 
sues the Jewish Far))icr, a monthly periodical published in Yid- 
dish, the editorial staff of which has charge of the extension 
work. The local societies were afterwards centralized into 
a Federation of Jewish Farmers of America. Through this 
federation we spread the gospel of cooperation and introduced 
the Raift'eisen system. We asked each group to subscribe to- 
gether $500, in shares of $5 each, and we then loaned them 
$1,000, that is, $2 for every dollar subscribed, at 2 per cent 
interest per annum. The small community noAV had $1,500 
for their emergency needs. If a member of the community 
falls short of immediate funds, he does not have to borrow the 
money from his mercenary grocer or from the usurious money 
lender, but he can get it from his own community bank — from 
his fellow farmers Avho do not need the money just then, but 
may have occasion to use it later on. This community bank, 
or cooperative credit union, in the management of the affairs 
of which he has the same voice as any other member, regard- 
less of the number of shares held, charges him 6 per cent. 
The loan is granted for a period of not over 6 months and for 
a sum not exceeding $100. 

To date we have 18 of these banks in operation. Eight are 
located in New York, 5 in New Jersey, 4 in Connecticut, and 1 
in Massachusetts. The 17 credit unions which were in oper- 
ation on September 30, 1913, reported a total membership of 
517, and a capital of $9,165. Up to that date they had been 



GEORGE W. SIMON 67 

in operation for a period averaging 13 months, during which 
time they had loaned out $73,624.66, or about 8 times their 
capital. Their net profits amounted to $1,317.93; that is, at 
the rate of I314 per cent on their original capital. 

How Credit Unions Operate 

The operation of our credit unions is simple. The by-laws 
are plain. The membership of the cooperative credit union 
is limited to the farmers residing within a small area, and is 
open only to members in good standing in the local Jewish 
farmers' association, which is itself a branch of the central 
organization, the Federation of Jewish Farmers of America. 
Every member of the local association can become a member 
of the cooperative credit union by buying at least one share. 
The 'par value of each share is $5. None of the officers re- 
ceives any remuneration for his services, except the secretary,, 
who is allowed a nominal recompense. The 17 banks had a 
total expense, in 13 months, of $726.93. The only loss sus- 
tained by any of the credit unions was a loss of $27.98 by the 
Credit Union of Colchester, Connecticut, through the failuire- 
of its depository, the First National Bank of Norwich, Conn. 

The benefits derived by our farmers from these rural credit 
systems are manifold. Our willingness to make loans on see^ 
ond mortgages to our farmers induced the local bankers to> 
make them first mortgages, where otherwise such were not 
available. In other words, we helped to discount the per- 
sonal qualities of the farmer, and gave him a strong moral 
support. 

The Credit Merchant Losing Out 

After the R.aiffeisen system was introduced among our 
farmers, they were released from the grip of the local store- 
keeper, and they were no longer obliged to buy from him fer- 
tilizer of an unknown quality, but they organized their ow» 
purchasing bureau through which they obtained direct fromi 
the factory fertilizer which had been tested by the local state 
experiment station. Moreover, they received credit for '€> 
months, and even a year, paying only 6 per cent interest for 
it. They obtained seeds from reliable s.eed houses which 
were true to their variety and quality. They purchased im- 
plements at wholesale prices direct from the manufacturer. 



68 MARKETING AND FARM CREDITS 

111 some parts of New York state the farmers found diffi- 
culty ill obtaining tire insurance, and were obliged to pay ex- 
orbitant rates. Having learned the advantages of coopera- 
tion, they decided to apply the principle of the credit union 
to this problem. They thereupon organized their o^^^l mu- 
tual lire insurance company, and the cost was reduced to a 
minimum. At the end of 9 months they had written insur- 
iuiee policies amounting to $654,000, the average rate to the 
farmer being 10 cents a hundred — which compares favorably 
with the old rate of $4 per hundred, charged by the indepen- 
dent companies. The tire loss during the tirst year was less 
than $1,000. It was estimated that the saving to the Jewish 
farmers who were connected with the mutual fire insurance 
company is not less than 4^35,000 in one year. Resides, the 
other farmers in the neighborhood obtained lower rates from 
the independent companies which felt the brunt of competi- 
tion. 

Whipping the Milk Dealers. 

In another locality the farmers had difficulty with the milk 
dealers, who generally cut down the price of milk in the sum- 
mer, and thus robbed the farmer of the little profit he can 
make while the cows are in pasture. Our farmers organized 
themselves together with their native neighbors, and for a 
week they started a ''lockout" and refused to sell milk to 
the dealers. They even spilled the milk over the field. At 
the end of a week a settlement was reached, and the farmers 
are now getting 5 cents -a quart the whole year roiuid. In 
another locality they even went a step further. They organ- 
ized a cooperative creamery and opened an agency in New 
York which receives the product fresh every day and de- 
livers it direct to the consumers. Their motto is : " From the 
producer to the consumer." Eggs are also handled in the 
:same manner. At the end of the year the profits will be di- 
vided as follows : 50 per cent to the farmer. '25 per cent to the 
consumer, and *25 per cent to a fund to be used for emergency 
needs and for the encouragement of cooperation. 

While our Jewish farmers have organized their purchasing 
agency more or less satisfactorily, their selling agency is not 
yet developed, firsts because our people are rather scattered, 
but secondly, and mainly, because their products are not 
stiindardized : and this is a problem which is hard to solve for 
.all groups or individuals. 



GEORGE W. SIMON (59 



Caring- For Women's Interests 

The Avomeii on the farms were not left :out of considera- 
tion. In many places the local societies organized Jewish 
ladies' auxiliaries to help make the lot of the women on the 
farm more contented. Many a promising farm has to be sold 
because the women on it find rural life too monotonous, too 
barren, devoid of all amusement and recreation necessary to 
offset the day's drudgery. Many a young man |has to relin- 
quish a hopeful agricultural career because he cannot find a 
mate who would east her lot with him on a dreary farm. 
These ladies' auxiliaries are, therefore, a blessing to the farmer 
and his family. We must admit that the /women on the farms 
in this country have been neglected, and it is gratifying to 
note that our department of agriculture has established a 
rural organization service which is doing much towards 
brightening the lives of the women on the farm. 

Some people contend that farm credit differs essentially 
from commercial credit ; that the period of repayment of 
the loan must be longer; and that the farmer cannot make 
his turnover as quickly as can the merchant. While this is 
true asi far as the long-term loans are concerned, it is not 
necessarily so with the short-term loans. In 13 months the 
17 credit unions, with a capital of $26,169.63, including the 
money which we advanced, loaned out $73,624.66. In other 
words, their capital made a turnover of 3 times in a little 
over a year. 

I wish to touch upon one more important point. Where 
we introduced our credit unions the local banker was in no 
way hurt, but on the contrary, he has profited by it. Farmers 
who never knew the significance of a bank account' learned 
its advantages and have increased the ,business of the banks, 
to a great extent. 

Legislation a Vital Need 

In conclusion I would say that the most important step 
necessary to further the movement of the agricultural co- 
operative icredit unions in this country is the enactment of 
proper laws in the different states, and legalizing of their in- 
corporation. I am glad to note that several of the states have 
already taken steps to ^mend their state laws so as to legal- 
ize the incorporation of credit unions. Our credit union in 
Massachusetts has the distinction of being the first in that 



70 MARKETING AN>P FARM CREDITS 

state, and as a (matter of fact, the first legally authorized 
■credit union among farmers in the United States. Our 8 
■credit unions in New York have already taken steps to incor- 
porate under the luew law recently passed by their state legis- 
lature. 

Furthermore, we need proper leadership. We need leaders, 
not from above, but from within. We need leaders in whom the 
farmers have eo'nfidence and .whom they can follow. Thus, our 
young graduates from the colleges can do much for our farmers 
and the country at large. 

Finally, the federal and state governments should throw off 
their fear of '.'paternalism" and "class legislation," and should 
treat the farmers as they treat the bankers and other legiti- 
mate businesses. After the proper laws have been adopted they 
should take, at least in the beginning, the leadership and initia- 
tive in establishing rural banks, and if necessary', in subsidizing 
these banks, for a time at least, so as to bring to the farmers, 
and through them to the country at large, immediate relief and 
to demonstrate the practicability of modern rural financing. 
We will then have developed a greater nation, built upon the 
foundation of sound rural financing. 

What our society could accomplish with strangers in a 
strange laud, and under adverse conditions, Avhat could not be 
achieved by the American farmers under proper guidance ? 



THE RELATION OF THE FARMER TO THE 
TRUST QUESTION* 

Samuel Untermter 

I expressed to your secretary my hesitation in accepting 
your invitation to address you on the ground that my views 
on the topic on which you have asked me to speak are likely 
to prove unacceptable to many of the members of this Con- 
ference. He assured me, however, that the purpose of the 
meeting was to be instructed upon all aspects of the questions 
involved and that you are not wedded to any given point of 
view. I am accordingly here to speak very frankly. 

*Delivered before the second National Conference on Marketing 
•and Farm Credits at Chicago, in April, 1914, in joint program with 
the Western Economic Society. 



SAMUEL UNTERMYER 71 

The relation of the farmer to the trust question is of course 
one of the most direct personal and pecuniary interest and 
concern. If it can be made possible by the enforcement of 
existing law or by supplementary legislation to restore and 
maintain the free flow of normal competition and to so regu- 
late it by law as to prevent unfair and ruinous competition, the 
farmer will share with the rest of the community in the bene- 
fits that should flow from the reduced cost of living. 

It is not however with the relation that the farmer should 
hear to the trust question nor with his relation to the ques- 
tion as a consumer that I care particularly to deal. There is 
no occasion for extended discussion on that point. There can 
be no doubt as to what that relation should he. As the chief 
consumer of the country, it is manifestly in his interest that 
the value of everything he buys shall be fixed in an open and 
stable market where there will be no opportunity to levy 
tribute upon him. Ruinous cutthroat competition is no more 
in his interest or in that of any other class of the consumer 
community than is monopoly. It is an economic curse. It 
disturbs the natural currents of trade, leads to spasmodic peri- 
ods of over-production and under-production and consequent 
instability of prices and is the high road to monopoly. It is 
quite as important to regulate competition as to suppress mo- 
nopolies and trusts. 

The questions for discussion may be stated thus : 
What is the real attitude of the farmer as a producer to 
the trust question? Is it just sincere, consistent or public 
spirited. What should he his attitude both in his own inter- 
est and as a citizen? To these questions I answer, and shall 
endeavor to prove, that his attitude is unjust, inconsistent and 
unwise. 

This broad indictment is based upon (1) the drastic char- 
acter of the anti-trust laws in the farming states as applied 
to all forms of induetry other than farming; (2) the exemp- 
tions that have been engraften upon these laws in favor of 
the farmers; (3) the failure to enforce the laws against them 
in states in which the exemptions do not exist; (4) the attitude 
of their representatives in Congress and (5) the many open 
violations of the federal anti-trust law that exist by sufferance 
in the various forms of pooling and selling arrangements among 
the farmers in the different sections of the country. 



72 MARKETING AND FARM CREDITS 



When Cooperative Laws Are Discriminatory 

As illustrating: these unfair discriminatory laws, that are 
sometimes cloaked under the euphonious disguise of "Cooper- 
ative laws for Marketing Farm Products," the Kentucky act 
of 1906 expressly exempts the growers of wheat, corn, oats, 
hay, tobacco and other farm products from the operation of 
its anti-trust statute and legalizes pools and selling agencies in 
the farm products. 

In California in 1907, and again in Colorado in 1913, laws 
were passed expressly authorizing pools, combinations and 
agreements that would permit of reasonable profits through co- 
operation and the elimination of competition. 

The license to discriminate in the enforcement of the federal 
anti-trust law in favor of the farmers is impliedly involved in 
the rider that was attached to the $300,000 appropriation of 
1913 for the enforcement of the Sherman law, by the terms 
of Avhich the attorney general is forbidden to apply any part 
of the fund in the prosecution of — 

(b) Producers of farm products and associations of farm- 
ers wiio cooperate and organize in an eft'ort to and for the 
purpose of obtaining and maintaining a fair and reasonable 
price for their product. 

It is common knowledge that price-fixing agreements in the 
form of selling agencies are in active operation in intrastate 
and interstate commerce in farm products all over the coun- 
try, of Avhich those in cotton and fruits are conspicuous exam- 
ples. In a few staples, of which that of the cranberry groov- 
ers is the most generally cited, a virtual monopoly is main- 
tained in the form of a common selling agency which exacts 
for the growers whatever price they see fit to fix. 

In none of the states in which these combinations (all of 
which are within the condemnation of the Sherman law) are 
expressly legalized and exempted from the operation of the 
state anti-trust law, is there provision for their regulation by 
public authority. In none of them is any relief provided 
against their levying undue tribute except in the vague re- 
quirement that the combination may exact only reasonable 
profits — whatever that may mean in the absence of au execu- 
tive body to protect the public. 

The country is honeycombed Avith these pools, trade agree- 
ments and gentlemen's understandings under cover of selling 



SAMUEL. UNTERMYBR 73 

agencies, trade associations, social clubs, information bureaus 
and innumerable other disguises embracing most of the de- 
partments of trade and industry. Every now and then the 
government pounces upon some unfortunate industry, like 
the members of the wire, Avindow glass, turpentine, bath-tub, 
straw-board, wood-pulp and wrapping paper pools, in a spas- 
modic and haphazard fashion, selecting its victims at ran- 
dom, collects fines from the little fellows and sometimes — 
generally unsuccessfully — tries to send them to jail — only to 
find them getting together again after the storm has blown 
over, but in a more elusive form as the result of their ex- 
pensive and uncomfortable experience. 

We all know that the dealers in anthracite coal in the larger 
cities agree on rates every year, which are publicly announced. 
There is no such thing as competition between them and the 
anthracite coal trust would not tolerate it. 

When in 1912 the government concluded to enjoin the west- 
ern railroads from advancing their freight rates it found no 
difficulty in making proof of the agreement, which had been 
negotiated and effected in open convention. The same is true 
of the passenger rates and time schedules between the great 
trunk line systems that are supposed to be competitive. It is 
generally conceded that there is a substantial profit in the 
present price of steel rails. Is there any competition in the 
price of rails or of any of the other staples in the steel trade 
as between the different manufacturers? All these arrange- 
ments are in plain violation of the Sherman law. But does 
any federal official attempt to enforce the law? 

Outlawry Logical Result of Unsound Economic Policy 

These are the daily object-lessons that tend to make of us 
a lawless nation. 

This anomalous condition of insubordination and defiance 
of law by our men of affairs to whom we look up as constitut- 
ing our best and most enterprising citizenship is the inevita- 
ble outcome of an unsound and destructive economic policy, 
from the effects of which the farmers by reason of their vast 
political power, are seeking to exempt themselves whilst im- 
posing that policy upon the rest of the country. 

The only possible excuse for such a position on the part of 
the farmer is that he, as the most valuable and the greatest 
wealth-producing and least-protected element in our industrial 



"74 MAUKKTIN\^ ANP FAKM CUKPITS 

lit'o. is ontitlod to oxiMuptions and immuiiitios at tho oxihm\so 
of the rest of tho I'oinniunity. 

Tt is not ii\toniiod horo to siiiTiTost that those trade arranuo- 
inonts shonld not bo pornvittod nndor irivon vostriotions. That 
question Avill be diseussed later. Hut 1 insist that if they are 
to eontinno inider the ban of the bnv. as they now are. that pro- 
hibition shonUi be generally applieable to all indnstries. in- 
elndinjr that of the fanner. 

There is no basie principle upon whioh any snoh exemption 
or disoriniination oan be jnstitiod. AVhy should tho ootton 
irro\vei*s be sntYored to oonibino in tho marketing of their prod- 
uct so as to regulate the prioe and output, whilst that right is 
denied to the mauufaoturei*s of cotton goods? Or why should 
not the eoal operators have the same privilege? Why have 
the cranberry growers been openly peruiitted to maintain a 
selling agiuicy in Now York City thi'ough which about 00 per 
cent of the product of the entire country is handled, whilst 
the milk dealers are sent to prison for doing the same thing? 
Surely such unequal onforconumt of tho law cannot bo in tho 
public interest. 

Where Farmers Are Inconsistent 

The injustice and inconsistency of the farnun's' attitude to 
Avhich I have referred consist in his insistence on denying to 
every other industry the right of cooperation to restrict com- 
petition whilst he iusists upon exemption for his own occupa- 
tion and is seeking to punish as crimes when committed by 
other acts which when perpetrated by him are not considered 
as inimical to tho public welfare. 

It is dit^cult To see in the mental processes that can bring 
about siu'h a result anything beyond the blindness of self-inter- 
est. It is not surprising that under such circumstances coiu'ts 
aud juries refuse to enforce the criminal provisions of this 
statute unless they tind proof of actual opprossiou or uufjiir 
business nu^thods accompauving the technical violations of the 
law. 

What. thou, should the farn\ors in all fainu^ss do in the 
eircumstauces? What should bo their attitude to the trust 
qtu^stiou? What is tho wise public policy? Is there any ten- 
able ground on which they should bo exempted from tho gen- 
eral rule? Should all arranginuents and devices for tvgulatiug 
prices and output between conipetitors. including those apply- 



SAMITEL UNTBRMYBR 75 

ing to their own business, be forbidden? Or should they all 
be permitted? If the latter, should sueih peniiLssion he within 
given limitations and what should they be? The answers to 
these questions point the only just way of approaching and 
seeking to solve this problem. 

The discussion of this question involves only the various 
forms or temporary agreements and understandings between 
actual or potential competitors in a given industry, having for 
their purpose uniformity of price or regulation of output 
whether expressed through pools, selling agencies or otherwise. 
They are not usually in corporate form or represented by cap- 
ital stock. 

The proposal does not include any chmige in the existing pro- 
gram far dealing with the trusts and combinations that are in 
corporate form and with which the government and the courts 
have been mainly concerned except to render their prosecution 
and dissolution more effective. The impression that there has 
been anything like a general prosecution of unlawful combi- 
nations in the interstate commerce is a mistaken one. The suits 
that have begun are trivial in number and aggregate import- 
ance as compared with the known violations. They have been 
■directed mainly against the more conspicuous consolidations 
that are in corporate form and the practical results have been 
negligible. 

Government Regulation Can Protect Public 

There are many reasons why the arguments for the suppres- 
sion and extermination of these trusts should not apply to the 
pools, agreements, understandings and price-fixing and out- 
put-regulating devices, provided the latter are placed under 
rigid government regulation and restriction as to the terms 
and conditions of the agreement so as to effectively protect the 
public against all danger of extortion or oppression. 

1. The latter do not involve stock watering, exploiting the 
Investing public, change of ownership or closing of mills or 
factories. 

2. There is not the same power or incentive to exact exor- 
bitant prices ; no excessive dividends are required to be earned 
on inflated capital to be used as a basis for unloading stocks at 
exaggerated prices and there is the constant peril of inviting 
new competition and thus disrupting the agreement. 



76 MARKETING AND FARM CREDITS 

3. The element of individuality is preserved; there is no 
permanency to the arrangement ; each of the parties must con- 
tinue to maintain his plant and selling force in condition to 
resume competition at any moment. He must accordingly 
avail himself of all new inventions. 

4. There is a continuing competition in costs of production 
between the parties to the arrangement resulting in economy 
of manufacture and distribution and of general management, 
since each party secures the sole benefit of such economies. 

5. There is not the inducement or opportunity for the acts of 
oppression that are practiced by the trusts in order to main- 
tain their supremacy. The interests of the latter are perma- 
nently and indestructibly merged whilst under these tempor- 
ary arrangements such acts of oppression are dangerous and 
unlikely. The friendly cooperators of today may be the bitter 
competitors of tomorrow. 

6. They offer a means of escape from destructive competi- 
tion without driving competitors to combination with all its at- 
tendant evils. 

These arrangements should not, however, be longer tolerated 
in their present furtive unlawful form, whether they apply to 
the product of the farmer, the manufacturer or the middleman. 
They are a standing invitation to extortion and exploitation of 
the public and a menace to industrial freedom. There is only 
one way of exterminating them and that is by substituting in 
their place permissive public agreements that shall be subject 
to federal approval and supervision. 

What to Do With Trusts 

In dealing with the trusts an entirely different policy should 
be pui*sued. I favor their enforced dissolution and actual and 
complete segregation, as nearly as may be, into their original 
parts and the enactment of legislation that will ensure their 
being kept segregated. None of the plausible arguments that 
were urged in favor of their organization have materialized. 
The extermination of the vital element of individuality and the 
substitution of bigness and bureaucracy have more than coun- 
terbalanced their supposed advantages. They can hold their 
supremacy only when they virtually control the industry, and 
they can continue to control it only through imfair practices. 

It is to be hoped that this vexatious problem of subduing and 
eliminating the trusts is in a fair way toward eventual solu- 



SAMUEL UNTBRMYEIR 77 

tioii and that we are at last within sight of industrial peace. 
True, little has yet been actually accomplished in the way of 
effective legislation, we are still as tightly as ever in the grip 
of the money trust and the laws now under consideration by 
Congress are as yet disappointing in that they do not ade- 
quately meet the situation. But the issues are framed in con- 
crete form and I am encouraged to believe that the long strug- 
gle between big business and the people is happily nearing its 
end notwithstanding the reports of the past few days from 
Washington to the effect that comprehensive legislation is to 
be postponed until the next session. 

The rumor is incredible. It would be the worst kind of po- 
litical blunder and almost a national misfortune if after all 
this agitation and investigation there is to be further delay 
in the settlement of this question. The reason offered in favor 
of the proposed action is the most conclusive argument against 
it. The obvious dictates of business sense and political expe- 
diency require that the agitation be ended. That can be done 
only by the enactment of the necessary comprehensive legis- 
lation. The other method serves only to prolong the existing 
uncertainty, unless the party in power intends to abandon its 
program and violate its campaign pledges, which seems to be 
the hope of the interests that are now urging delay. 

The same effort was made and the same ''public sentiment" 
was sought to be manufactured when currency legislation was 
under consideration. Fortunately the scheme did not work 
and we now know how absurdly the effect on business of the 
then pending legislation was exaggerated for the purpose of 
defeating the reform. Surely we cannot be so blind as to fail 
to detect the same influences behind this demand. 

If action is to be postponed the democratic anti-trust policy 
may as well be considered dead. Every congressional contest 
this autumn will be conducted on the plea that the election of 
the democratic candidates involves the reopening of the ques- 
tion, with its accompanying continuance of business unsettle- 
ment. It will also be urged that the party has no definite 
views on the subject and is incapable of framing intelligent 
legislation. These pleas cannot fail to be effective and may 
lead to the defeat of the party that frittered away its oppor- 
tunity to settle this question. There is nothing to be gained 
and everything to be lost both to the business community and 
to the party by such a procrastinating policy. 



78 MARKETING AND FARM CREDITS 

Unless Congress now falters or permits its judgment to be 
beguiled by the same old false predictions of disaster that have 
so often in the past turned it from its plain path of duty into 
enacting mere palliatives instead of remedies we will soon have 
heard the last echoes of the conflict. 

An Absurdly Unequal Contest 

The contest seemed at one time hopelessly unequal. On 
one side are arrayed the most resourceful and powerfully en- 
trenched interests the world has ever known, a magnificently 
trained army with colossal stakes to protect and the single 
fixed purpose to retain its vast special privileges at all costs; 
on the other hand nothing but the disorganized hosts, appar- 
ently working aimlessly and at cross-purposes in the effort to 
batter down this citadel of entrenched power. 

The subject-matter of the contest is of exceeding intricacy 
and highly specialized, with well-nigh all the expert knowl- 
edge in the camp of the invaders upon the domain of indus- 
trial freedom. But the intuition of our people sooner or later 
penetrates beyond disguises and subterfuges into the economic 
truth of every proposition that affects them. It is an unfail- 
ing reliance and an endless source of wonder and admiration. 
We grope and blunder along in the darkness through difficult 
problems that we only half understand, but always into the 
light. 

And so within an incredibly short time since we began to 
realize our peril we find ourselves well on the way toward the 
solution of this problem that only a few years ago threatened 
to overwhelm us, if the President and Congress can only resist 
the subterranean influences that are being exerted from every 
direction to end the struggle in a series of weak compromises, 
resulting in colorless legislation that will settle nothing. 

Curbing Money Trust the First Step 

The first and an important step, but only one of many steps 
that we shall have to travel toward breaking the power of the 
money trust, has been accomplished in the enactment of the 
currency law. The money trust lies at the foundation of all 
our troubles with the trusts. It is the cornerstone upon which 
they rest. Its destruction is the only key to their solution. 
From it the other trusts and combinations radiate and on it 
they depend. They would disintegrate of their own topheavi- 



SAMUEL. UNTERMYER 79) 

ness but for the menace to new competition and the shield and 
protection against such competition that the money trust pro- 
vides. 

Business cannot be liberated so long as it is overshadowed 
by this octopus. Competition will not rear its head to give 
battle to the entrenched interests that are under the protect- 
ing wing of the men who wield this destructive power. No 
overt act is necessary on their part. The mere existence of 
the power is a continuing threat. So long as they dominate the 
sources of credit and can terrorize every new venture so long 
will it continue useless to attempt the emancipation of busi- 
ness. Disintegration of existing combinations will not in itself 
solve the problem. It must be supplemented by new compe- 
tition with fresh young blood and comparatively small begin- 
nings. That is not possible whilst the present concentration, 
of the control of credits continues in a few hands. All legis- 
lation must be directed primarily against its destruction and 
toward thus restoring freedom throughout the arteries of trade 
and finance. 

Our present predicament is aptly described in the report of 
the house committee on banking and currency of 1913 now 
commonly known as the report of the Pujo committee, in the fol- 
lowing words : 

"Far more dangerous than all that has happened to us 
in the past in the way of elimination of competition in in- 
dustry is the control of credit through the domination of 
these groups over our banks and industries." * * * 

"Whether under a different currency system the re~ 
sources in our banks would be greater or less is compara- 
tively immaterial if they continue to be controlled by a 
small group." * * * 

"It is impossible that there should be competition with 
all the facilities for raising monej^ or selling large issues of 
bonds in the hands of these few bankers and their partners 
and allies, who together dominate the financial policies of 
most of the existing systems. * * * The acts of this 
inner group, as here described, have been more destructive 
of competition than anything accomplished by the trusts, 
for they strike at the very vitals of potential competition 
in every industry that is under their protection, a condition 
which if permitted to continue, will render impossible all 
attempts to restore normal competitive conditions in the 
industrial world." * * * 



so MARKETING AND FARM CREDITS 

"If the arteries of credit uoav clogged well-nigh to chok- 
ing by the obstructions created through the control of these 
groups are opened so that they may be permitted freely to 
play their important part in the tinancial system, competi- 
tion in large enterprises will become possible and business 
can be conducted on its merits instead of being subjected to 
the tribute and the good \\ill of this handful of self-consti- 
tuted tnistees of the national prosperity.'' 

The democratic party is taunted on the one hand by the 
enemies of these reforms with unsettling business and shak- 
ing confidence in the stability of securities by the continued 
agitation of this subject. On the other hand the party is 
charged by the impatient radicals in its own ranks and in the 
ranks of the opposition parties with haviug made no headway 
toward destroying the existing dangerous conditions and that 
the various investigations and exposures that it has made have 
as yet no outcome other than the disturbance of business. 

In answer to our insistence that the mad gallop into the 
abyss toward which we were furiously driving has at least 
been checked, that moral standards have been raised and many 
objectionable methods abandoned in the tinancial world as 
the preliminary results of this agitation, the radicals challenge 
us to point to any case in which the grip of the money trust 
has been relaxed or its power weakened and we are bound to 
concede that no such results have yet been achieved. But the 
ground has been cleared and all the preliminary work has been 
done. 

Sighting Industrial Peace 

The public at last knows the facts and realizes the evils. It 
has located and diagnosed the abuses that so long eluded dis- 
covery and is thoroughly aroused and determined to extermi- 
nate them. Therefore I say we are in sight of industrial 
peace, since there remains now only the question of applying 
the appropriate remedies. 

We know that although our anti-trust law has been for 24 
years upon the statute books in its present form, the evils it 
condemns have continuously grown and thrived until they have 
threatened the very existence of our institutions and that even 
now, .when the law in its present form has been enforced to 
the limit of its capacity as the result of an insistent public 
sentiment, the practical results fail to meet our needs. 



SAMUEL UNTBRMYER 81 

We know that the legal machinery furnished by the act is 
defective and that the violations cannot be effectively reached, 
abated and punished without supplementing that machinery. 
We realize that our laws for the regulation of corporations 
are archaic and inadequate. They were framed before we 
Avere alive to the abuses that are sapping our industrial inde- 
pendence and at a time when the power of the special interests 
dominated our legislative bodies and dictated our laws to suit 
their purposes. We know that under the blighting influence 
of these laws and because of the absence of the protection to 
which we were entitled there has been foisted upon business and 
finance this concentration of the control of the credits of the 
country in a few hands that has come to be known by the mislead- 
ing name of the money trust and that has made these few men 
the masters of our financial destinies; that it has paralyzed 
initiative and destroyed independent action, that it constitutes 
today the most dangerous financial despotism the world has 
ever known and that if permitted to continue it will be de- 
structive to our progress. 

We recognize that in the train of these evils and as the 
result of this lawlessness, due to lack of law, have come cor- 
porate corruption, waste and irresponsibility that have blind- 
ed the moral perspective of the leaders and of their satelites 
in the financial world. 

All these things we know; but we do not know and it is 
not conducive to our peace of mind that we should know the 
extent to which we have been and are still being ruled and 
exploited, for the patience even of our people has its limits. 
We are intensely practical and so, without harking back to the 
mistakes 'or misdeeds of the past or wasting our energies in 
trying to settle scores with those who have brought us to this 
plight, our faces are set to the future to find a remedy that 
shall be so effective and all-embracing that the wrongs shall 
be undone and their repetition in the future rendered impos- 
sible. The people are not in quest of punishment or revenge. 
With a remedy in sight they are content to let bygones be 
bygones and to proclaim a general amnesty as to the past. 

Legislation Too Short-Sighted ■ 

The legislation now under consideration by Congress rep- 
resents a constructive policy. The main criticism of it is that 
it does not go far enough on the constructive side in the regu- 

6— M. p. c. 



82 MARKETING AND FARM CREDITS 

lation of eompotitiou in the direction to which I shall in conclu- 
sion now refer. 

The only aspect of the pendins: leirislation Avith which we 
have here to deal is that which relates to the various forms 
of cooperative arrangements for marketing- the products of 
the farms, factories and other industries. Under the pro- 
posed legislation they remain under the han of the law, are 
made more easily discoverable and are more severely pun- 
ished. They include farm products, as they should, if the 
prohibition of such agreement is to continue to be the policy 
of the government. They include also organizations of labor, 
Avhich I consider wrong. The statute was never intended to 
apply to them and there are other reasons that are to my mind 
conclusive in favor of their exclusion. But that is another 
story and one with which we are not now concerned. 

Enforcement of Law Imminent 

The time must soon come when with the aid of the In- 
dustrial Trade Commission the law, whatever it may be de- 
cided it shall be, will be generally and impartially enforced. 
This incredible situation of extending general imnumity to the 
farmers to violate the law whilst they are demanding and 
securing its enforcement against the industrial Avorld will 
not and slioidd not be longer tolerated. 

Agreements between competitors that have for their sole 
purpose the prevention of ruinous competition and the secur- 
ing of a reasonable profit should be made possible and lawful 
in all industries, subject to the approval and regulation of 
the new trade commission for which provision is made in the 
pending legislation. No one need become a party to such an 
agreement unless he sees fit to do so but competitors should 
no longer be compelled to ruin themselves and one another 
under penalty of being branded and punished as criminals. 
They will not do it, law or no law. The instinct of self-preser- 
vation will prevent it. This perverse policy will simply result 
in making of us a nation of In'pocrites and lawbreakers with 
a criminal code of honor in which nods and understandings 
will take the place of tell-tale writings. Every crossroads 
will have its "Gary dinners" at which "the state of the 
weather" Avill be the subject of discussion and which the law 
will never be able to reach. 



SAMUEL UNTERMYER 83 

Regfulated Competition a Way Out 

Unrestricted ruinous competition should be superseded 
by regulated competition. The former inevitably leads to 
monopoly. The latter does away with the oppression of 
weak competitors and with every vestige of pretext for 
combination. The distinction between cooperation and com- 
bination is fundamental. The former is distinctly beneficent 
if so supervised and restricted that the levying of tribute upon 
the public is prevented. The latter is economically unsound 
and oppressive. 

Instead of the innumerable secret and unlawful arrange- 
ments that are now tolerated, under cover of which there is 
now taken from the people "all that the traffic will bear" it 
will be the duty of the parties to submit their agreement to 
the trade commission. The latter, with the aid of its expert 
accountants, will determine whether the conditions are reason- 
able and fair to the public, in the same way that the interstate 
commerce commission now determines the far more complicated 
question of rates. With such relief at hand public sentiment 
will support the rigid enforcement of the criminal law against 
all trusts and secret arrangements. 

I offer, as I have for the past 5 years repeatedly offered 
this program as an answer to your question of what should 
be the relation of the farmer to the trust question. It en- 
ables the farmer to retire with honor from his now indefen- 
sible position of using the brute force of superior numbers and 
political power to perpetuate an act of glaring and unprece- 
dented injustice upon every other industry, involving the most 
offensive form of class legislation, the constitutionality of which 
is subject to the gravest doubt. 

This is his opportunity to solve the problem. Will he be 
sufficiently wise, just and far-seeing to grasp it? 



S4: MARKETING AND FARM CREDITS 



COOPERATION AT WORK* 

W. M. Stickney 
Of Lowell Hoit & Company, Chicago. 

I take it that ' ' Cooperation at Work ' ' means getting down to 
business. It means the actual production or the actual buying 
and selling of commodities by cooperative organizations now in 
operation. If this brief outline is correct, then the topic is so 
broad that to touch it even here and there would take many hours 
and lead us into many countries. 

It is not my intention, however, to tire your patience by 
thresihing over too much of the straw which has been through 
the machine again and again. But no story of cooperation at 
work would be complete without some reference to the time and 
place where the practical ideas of industrial cooperation were 
first evolved, and where their application is now the mai'vel of 
the economic and social world. And neither would it be com- 
plete without at least a few hurried snapshots here and there to 
show the magnitude of this movement among the highly civilized 
nations of the earth. 

I assume that the delegates of this Conference are familiar 
with the scope of cooperative work in Great Britain, Ireland and 
continental Europe. To me it is a marvelous story, and the 
more I study it the more I am convinced that cooperation is a 
new religion in the trade and barter and conduct of mankind. 
To me it is more interesting than all the records of battles and 
sieges. Kings and governments come and go, armies win and 
lose and leave little or nothing for posterity, but this struggle of 
men to live without oppression or penury, with some decency 
and opportunity, is really the only struggle worth thinking about, 
for it includes all others, and remains when others pass. 

The Start in Toad Lane 

Practical, common sense cooperative work began in a little 
•old ramshackle building in a muddy street called Toad Lane, 
Rochdale, England, in 1844. Twenty-eight men, working in 

* Delivered before the second National Conference on Marketing 
and Farm Credits at Chicago, in April, 1914, in joint program with 
the Western Economic Society. 



W. M. STICKNEY 85 

woolen mills for a wage that compelled them to live in poverty 
and destitution, made a solemn compact one gloomy November 
afternoon in 1843 to save 4 cents per week for one year, the 
money to be nsed to start some kind of an institution that would 
enable them to buy the actual necessities of life a little cheaper. 
These men were groping in the dark, but each man made good 
his contract, and after 12 months of self denial, saving a penny 
here and a penny there, they had in the treasury 28 pounds 
sterling, or $140, After renting the building mentioned and 
buying a few fixtures, they had $70 left to invest in a little- 
sugar, a little pork, a little jam and a little oatmeal. And sa 
the business was launched. 

They formulated a set of rules, however, that has caused the 
worid to make a beaten pathway to their door. These rules are 
today written wholly, or in part, in the by-laws of every strictly 
cooperative company no matter where it is organized, and they 
are also written into the cooperative incorporation laws of Wis- 
consin and other states. They are the commandments of this 
new religion in trade. They have revolutionized the business 
of empires and are slowly permeating every industry in the 
known world. 

This was 70 years ago, and the Toad Lane venture is now the 
largest business institution known to mankind — The Wholesale 
& Retail Cooperative Societies of Great Britain, The second 
year of its operation, 1846, it did a business of $3,500, with a 
net profit of $120. In 1912 it did a business of $614,427,000, 
with a net profit of $66,446,520. These profits, after paying 
interest on the capital stock, were returned to the patrons on 
the basis of patronage, and all told this institution has returned 
to its members and patrons over $1,100,000,000. This would 
have made 1,100 millionaires had the business been operated for 
private gain. 

This institution is both distributive and productive. Its: 
wholesale houses and manufacturing plants are to be fouaad im 
nearly every large city of England and Scotland. It owns the- 
largest flouring mills in Great Britain, owns steamship lines, teai 
plantations in Ceylon, grain elevators in the Canadian Nbrthr- 
west — ^in fact, the sun never sets on the purchasing stations and^ 
other interests of this mighty cooperative enterprise; That i? 
cooperation at work. 



86 MARKETING AND FARM CREDITS 



British Fanners Follow Lead 

The farmers of Great Britain are now rapidly following the 
lead of the cities in cooperative organization. The British Ag- 
ricultural Organization Society was formed in 1901 for the pur- 
pose of helping to organize new societies and instructing new 
and old ones in good business methods and intelligent manage- 
ment. There are about 500 cooperative societies among the 
farmers of Great Britain, with a membei^hip of over 30,000, and 
doing an annual business of over $7,500,000. Many, if not all 
of them, do much business direct with, the consumers' coopera- 
tive societies in the cities. 

Germany Evolves Cooperation 

Strange it may seem, but almost the same ideas were being 
evolved in Germany at the time the pioneers were organizing at 
Rochdale. Francis Frederick Schulze in Saxony and Frederick 
William Raiffeisen in Rhinish Prussia were laying plans in 1845- 
46 for starting cooperative bakeries and cooperative credit and 
purchasing associations among the people in their respective 
territories. Little was accomplished for a few years, and then 
the work grew almost, if not quite as rapidly as in Great Britain. 
In 1912 Germany had 28,141 cooperative organizations of vari- 
ous kinds, with a total membership of 4,579,740. Today the 
German farmers are so organized cooperatively that they are 
able to control all their agricultural operations from the pur- 
chase of everything which they msh to buy to the sale of their 
products to the consumer. In fact, almost everything which the 
German farmer does he does cooperatively, and this economic 
movement in the Empire has made a new Germany and brought 
prosperity, contentment and happiness where 60 years ago was 
poverty, destitution and discontent. 

All Europe Turning Cooperative 

What I have said of Great Britain and Germany is true in a 
measure of almost every country in Europe. Cooperation is at 
work everjnvhere. In France there are 2,975 cooperative organ- 
izations, with a membership of a little over 803,000, the annual 
business turnover being something like $55,000,000. In S\^^tz- 
erland there are something over 3,400 cooperative organizations, 
with a membership of practically the entire population. 



W. M. STICKNEY . gy 

Sweden has 3,362 cooperative societies of various kinds. Fin- 
land had but one cooperative society in 1901, and now has 1,100. 
Roumania has now about 2,100 cooperative credit associations, 
and 15 years ago there was not a cooperative institution in the 
country. Cooperation was unknown in Hungary in 1890, and 
today there are about 900 societies federated with a wholesale 
cooperative organization. Italy has a cooperative population 
of about 250,000, while Russia has 300,000 members of coopera- 
tive organizations. There are said to be over a half million 
members of cooperative societies in Austria, and more than 
2,300 cooperative organizations in Holland. t 

A Light for Irish and Danish Farmers 

In the cooperative marketing of farm products, Denmark and 
Ireland stand head and shoulders above all others in the bril- 
liancy of their achievements and the permanency of results. 
Fifty 3^ears ago the farmers in both of these countries found 
themselves in a pitiable condition — worse than the farmers in 
any part of the United States ever were or ever dreamed of be- 
ing. They were destitute, despondent and hopeless, and there 
was nothing but poverty in sight. Up to 1880 Danish and Irish 
farmers had gone along in the same old way — small farms, 
small crops, small prices, discontent, discouragement, discord, 
disease, degeneration and decay. But a few rare spirits saw a 
vision and became convinced that farmers must combine and 
work together in order to prosper individually. A cooperative 
creamery was organized at Olgod in Denmark in 1882, and now 
there are over 1,300 of these creameries, exporting over a mil- 
lion dollars worth of butter every week. Denmark has 36 co- 
operative bacon factories, 510 cooperative egg testing associa- 
tions, 1,200 cooperative retail societies, 560 cooperative savings 
banks with deposits of over $215,000,000, also 519 cow testing 
associations and 1,260 cattle breeding associations. Denmark 
is about one-fourth the size of Illinois, and yet she exports an- 
nually over $90,000,000 worth of butter, eggs, cheese and meat ! 
From poverty and destitution 40 years ago it has come to be the 
richest country per capita in Europe according to its popula- 
tion, and 89 out of every 100 families own their own homes. 
And we behold today a new Denmark ! 

And we behold a new Ireland. No country could possibly 
be in a more pitiable condition a few years ago, and, yet today 
Ireland is commencing to blossom like a rose. In many parts 



88 MARKETING AND FARM CREDITS 

it is said, to be as rich and prosperous now as the best portion 
of our own great Middle West. And this great regeneration has 
come about through the efforts of a band of cooperative mis- 
sionaries — Sir Horace Plunkett, a nobleman, Mr. R. A. Ander- 
son, a farmer, Mr. George W. Russell, the brilliant editor of the 
Irish Homestead, and Rev. Father Thomas A. Finlay, profes- 
sor of economics in the National University of Dublin. Each 
of these has been preaching the gospel of cooperation over 
Ireland during the last 20 years. It took 50 meetings, covering 
a period of more than a year, before these missionaries could 
get the farmers to organize a creamery. The first one was es- 
tablished in Limerick in 1889. It was a year before another 
one started. Today Ireland has nearly 500 cooperative cream- 
eries, 980 cooperative societies all told, with a paid-up capital 
of over a million dollars and an annual turnover of something 
like $12,000,000. And so we are told that the salvation of Ire- 
land is being worked out by a big cooperative scheme in which 
local societies, the wholesale society, the agricultural depart- 
ment of the government, the Irish Agricultural Organization 
Society, the Irish Homestead and the society of United Irish 
Women are all playing important parts. This is cooperation at 
work. 

Cooperation in Canada 

It is said there are about 2,000 cooperative organizations in 
Canada, the larger per cent of them being among the produc- 
ers of 3 of the northwest provinces. The Manitoba Grain 
Growers' Grain Association now has a membership of 12,000 
farmers and more than 300 local associations ; the Saskatchewan 
Grain Growers' Association has a membership of 25,000 farm- 
ers, with more than 600 local associations ; the United Farmers 
of Alberta has 15,000 farmer stockholders and over 500 local as- 
sociations. 

In each of these 3 provinces there is also a cooperative eleva- 
tor company, organized for the purpose of looking after the 
marketing of grain at terminals and also direct to the consum- 
ers. The Grain Growers' Grain Company, with headquarters 
at Winnipeg, was organized 6 years ago. It now has over 
14,000 farmer stockholders, a subscribed capital stock of 
$809,950, of which $645,361 is paid in. It has paid a 10 per 
cent dividend every year since it has been in business, and now 
has a surplus above all indebtedness of $183,000. It handled 
30,000,000 bushels of grain last year, and did a business 



W. M. STICKNEY 89 

amounting to $60,000,000. It operates an elevator at Van- 
couver, a terminal elevator at Fort William, a large flouring 
mill with an output of 2,500 barrels a day, together with sev- 
eral other industries. It owns a newspaper called the Grain 
Growers' Guide, a large printing establishment, and a seat on 
the Winnipeg Grain Exchange. I quote the following from a 
letter received yesterday, written by the editor and manager- 
of the Grain Growers' Guide. Speaking of the Grain Growers' 
Grain Company, he said : 

"To show you how the farmers look upon the company 
I might state that since November last the paid-up capital 
of the company has increased by $125,000, sent in by the 
farmers themselves. The Grain Growers' Grain Company 
has been a huge success since the day of its inception, and 
has resulted in forcing every other grain company in West- 
ern Canada to give better service to the farmers and better 
prices. It is no exaggeration to say that the farmers of 
Western Canada everywhere are today securing at least 5 
cents per bushel more for their wheat than they would with- 
out the Grain Growers' Grain Company in the field. 

"Aside from the grain business the Grain Growers' Grain- 
Company has performed a tremendous service by opening a 
cooperative department through which it supplies lumber, 
fence wire, apples, fence posts, flour, feed, binder-twine and 
coal to farmers in carlots. The result has been, a great 
lowering in the price of these commodities. 

"The Grain Growers' Grain Company is the chief factor- 
in the great revolution which is now taking place in West- 
ern Canadian trade methods. ' ' 

Government Aid to Canadian Cooperators 

"In 1911 the Saskatchewan Cooperative Elevator Company 
was launched. The government of Saskatchewan assisted the 
farmers to secure the necessary capital at a low rate of inter- 
est, but the control and operation of the company is entirely 
in the hands of the farmers. None but farmers may hold 
stock, no farmer more than 10 shares, and no shareholder has 
more than 1 vote at a shareholders' meeting. Thus the con- 
trol of the company must remain always with the farmers. 
This company in the short course of its existence has erected 
200 modem elevators through Saskatchewan, and thus pro- 
vided its farmer shareholders with an independent avenue 



no MARKETING AND FARM CREDITS 

through which to plaoe tlieir gram upon the markets of the 
worW. The paid-up capital of the Saskatchewan Cooperative 
Elevator Company is now over $350,000, its total ass-ets 
$1,709,487.57, and it has 13,156 shareholders. During the 2 
years of its operation the company has handled nearly 30.000,- 
000 bushels of the farmers' grain and its total profits have 
been over $220,000. 

' ' In 1912 the farmers of Alberta organized the Alberta Farm- 
ers ' Cooperative Elevator Company. The government of Al- 
berta also assisted tlie farmers of that province in establish- 
ing their OAvn company, by enabling them to borrow the larger 
portion of their capital at a low rate of interest, but has no 
voice in the control or operation of the company. As with the 
other 2 companies, the shareholders in the Alberta company 
must always be farmers. The shares of this company are '$60 
each, no shareholder can hold more than 20 shares, and no 
shareholder has more than one vote at any sliareholdere' 
meeting. Thus the control is vested forever in the farmers. 
Though less than a year in operation, the Alberta Farmers' Co- 
operative Elevator Company has erected and is now operating 
50 elevators in that province, and has 5,165 shareholders. The 
paid-up capital is nearly $100,000 and the total assets $430,000. 
During the present grain season the company has handled 
3,500.000 bushels of grain. Alongside each elevator is erected 
a warehouse for the handling of other commodities on the co- 
operative plan. 

"This brief story gives an idea of the magnitude of the busi- 
ness operations of the organized farmers of Manitoba, Sas- 
katchewan and Alberta. During the present grain season they 
Mill handle through their o■\^•ll companies with 48.000,000 to 
50.000.000 bushels of grain, and in addition to securing much 
better prices for their farmer shareholders than they could 
have secured the old monopoly system, they will undoubt- 
edly ihave a net profit of $400,000. This money will not be 
used to enrich a few, but will be devoted to an extension of 
their operations in the grain business as well as in other fields, 
and in the prosecution of educational work and organization 
for the improvement of agricultural conditions. It is the aim 
of the organized farmers to extend their operations until every 
farmer is a shareholder, all the grain is shipped through their 
OAvn companies and also eventually to handle for their share- 
holders a large Ihie of staple commodities." 



W. M. STICKNEY 91 

These are a few snapshots of cooperation at work in other 
lands. The reports of our consular officers show that coopera- 
tion at work is a success in every country in Europe. I have 
searched the records in vain to find a country where it has 
been tried and failed. The idea is broadening under every 
flag, and it is said today that more than 60,000,000 people in 
Great Britain, Ireland, continental Europe, Asia and America 
are directly interested in cooperative production and distri- 
bution. 

America Slow to Adopt Cooperation 

It may appear to some that we here in America have been 
;a little slow in taking up cooperative work. It must be remem- 
bered, however, that this is practically a new country, with a 
territory equal to Great Britain, Ireland and continental Europe 
combined. Even here in the Mississippi valley men still live 
who braved the dangers and hardships of pioneer life in helping 
to push westward the frontier of civilization to the foothills of 
the Rockies. The ground upon which Chicago is now built was 
largely a swampy marsh within the memory of men living to- 
day. The pioneers who settled this western country were very 
busy men, looking after drainage and fencing, building cities 
and railroads, establishing churches and schools, and the work 
accomplished during the last 75 years might easily be consid- 
ered one of the wonders of the world. 

It is, therefore, but natural that cooperation as we know it, 
•was for a time neglected. There has been a mighty awaken- 
ing, however, within the last few years, and the American peo- 
ple are today brought face to face with the problem of a more 
economic distribution of all the products that come from fac- 
tory, farm and mine. This is the problem which brings the 
delegates of this conference together, and it is a question of 
vital importance to more than 100,000,000 people in the United 
States. Some of us, millions of us, believe that it can be 
brought about through a phase of economic and social devel- 
opment which is called Cooperation. 

Survey of American Movement 

There are said to be in this country something like 540 co- 
operative stores, 580 cooperative cheese factories, 1,800 or more 
cooperative cotton warehouses, 2,100 cooperative insurance 
companies, 2,250 cooperative creameries, and 2,900 cooperative 



92 MARKETING AND FARM CREDITS 

graiu elevator companies. This, of course, is but a partial list^ 
as the United States Agricultural Department gives out the iu-- 
formation that there are in the United States somethinsr over 
(50,000 cooperative organizations all told. 

The cooperative idea has spread rapidly over the grain belt 
states of the Middle "West during the last 10 years 1 have 
been iu personal touch with this phase of cooperation at work, 
and it would seem appropriate to give a brief description of 
what has been accomplished. It would be impossible for me 
to descrilv this economic movement, however, if 1 were cou- 
tined to those organizations which are purely cooperative. 
Many of the associations which I shall mention are stock com- 
panies incorporated under the regular incorporation laws of 
the states in which they are located. Three or 4 states only, 
where there are any considerable number of farmer grain or- 
ganizations, have a cooperative incorporation law. In the 
other states a few of the companies are conducting their busi- 
ness on a cooperative basis, but are doing so through a "gen- 
tleman's agreement."' or by contract. It is readily seen, there- 
fore, that quite a percentage must still use the capitalistic form 
of incorporation or stay out of business. EtYorts were made 2 
years ago to enact a cooperative incorporation law in Dlinois 
and also in Iowa, but they failed, possibly on account of the 
large number of old school politicians who still inhabit the leg- 
islatures of these commonwealths. But the handwriting is on 
the wall, and the time is certainly not far distant when every 
state will have a cooperative law similar to the one which "Wis- 
consin passed iu 1912. and which Indiana. "Washington and 
New York enacted a few months ago. 

Progress in Illinois 

Illinois has about 340 prosperous cooperative grain com- 
panies today where 10 years ago there were not over 22. and 
15 to 20 new ones are being organized every year. The tinan- 
cial gain to the producers of this state has been enormous, 
niiuois raises not far from 500.000.000 bushels of grain each 
year, and probably sells about olX"). 000.000 bushels. Conserva- 
tive men estimate that this movement among the farmers of 
Illinois, commeuciug in 1902, has been the means of raising 
the price of grain at least 3 cents per bushel over the entire 
state. That is, the farmer is receiving 3 cents per bushel more 
for his grain that he would if there were no cooperative eleva- 
tor companies in the state, and 3 cents a bushel on 300.000.000 



W. M. STICKNEY 93 

bushels of grain means that $9,000,000 are left in the pockets 
of the Illinois farmers that would have been lost either in dis- 
tribution or otherwise. These figures do not include the profit 
on the coal handled by the farmer companies, and it is said 
that the retail price of this article has been reduced from 50 
cents to $1 per ton. Many of them handle lumber, and the 
price of this commodity has been reduced from $2 to $10 per 
thousand. Many handle building material, and tihere has been 
a substantial reduction in the price of these commodities. 
This is also cooperdtion at work. 

And this is not all the story. A permanent advance of 3 
cents per bushel in grain to the farmer means that at least 
$5 or more is added to the value of every acre of land where 
these conditions obtain. It means added value to every item 
of property of every kind in every community where there is 
a cooperative company. No one can safely estimate and but 
few can comprehend the enormous benefits that have been de- 
rived from this cooperative movement among the farmers of 
Illinois and other grain belt states during the last 10 years. 

The story of Illinois is the story of Iowa, and in a large 
measure it is the story of South Dakota, Minnesota, North Da- 
kota, Nebraska, and Kansas. Twelve years ago Iowa had less 
than 25 cooperative elevator companies, and today she has 360, 
Nebraska has something over 200, South Dakota about 225, 
Minnesota 260, North Dakota 285, and Kansas about 150. All 
have state associations of which the local companies are mem- 
bers, and all are working hand in hand for a greater measure 
of cooperation. 

There are also numerous cooperative grain companies 
scattered over Indiana, Ohio, Michigan, Wisconsin, Oregon, 
Oklahoma and Missouri. All told there are said to be over 
2,900 of these organizations in the United States, with at least 
375,000 stockholders. These companies are said to have an in- 
vestment of $30,000,000 and do an annual business of over 
$600,000,000. 

Careful men estimate that the grain growers of the Middle 
West are receiving a profit of at least $50,000,000 each year, 
due entirely to their organizations — that is, they are receiving 
enough more for their grain and buying their coal, lumber and 
other farm supplies enough cheaper to equal this amount. Say 
it is but $25,000,000 and still you have an enormous sum. 

But by far a greater benefit than the monetary side has come 
to the people of the grain belt states. Everybody is becoming 



94 MARKETING AND FARM CREDITS 

a student of cooperation. "We think this spirit is of vastljr 
more benefit than the 25 or 50 millions of dollars. To be sure, 
the financial must go hand in hand with that larger benefit, but 
somehow and in someway a very wonderful change has come 
about. 

Few Failures in Grain Movement 

And these farmer grain organizations are a financial success. 
I venture the assertion that there is a smaller percentage of 
failures among these companies in the Middle West than there 
is in any other business, occupation or profession. I am famil- 
iar with the situation in Illinois and Iowa, where there are 
about 700 farmer companies, and I do not know of more than 
4 or 5 organizations that have gone out of business during the 
last 10 years. Not over 1 or 2 of these were failures, the others 
having discontinued business on account of local conditions. 
This is a record to be proud of considering the opposition with 
which they have had to contend. In nearly every instance a. 
cooperative grain company has had to fight its way into ex- 
istence, and then fight afterwards for its very life. But this, 
is history. Everywhere cooperation has always been assailed 
by men who fatten on the evils which others are trying to cor- 
rect. 

The annual convention of each state Farmers ' Grain Dealers "■ 
Association is held during the winter months. Every farmer, 
every man connected with local companies, and everyone inter- 
ested in the principles of cooperation is invited and urged to 
attend. Printed programs are arranged and distributed over 
the state weeks before the convention meets. The best speak- 
ers that can be secured are engaged to deliver addresses on 
seeds, soils, grain raising and marketing, intensive farming, 
and on every topic pertaining to cooperative advancement. 
These conventions are usually in session for 2 or 3 days, and 
the attendance often reaches the 2,000 mark. 

The Social Element Finds Free Play 

At the annual stockholders' meeting of each of these local 
companies a speaker is usually secured to address the farmers 
on cooperative marketing and the science of agriculture. If 
these meetings happen to be held in the winter an indoor pic- 
nic dinner is often served in the town hall by the farmers' 
wives. The business session of the corporation is held in the 



W. M. STICKNEY 95 

forenoon, and after dinner there is generally a program of 
music, recitations and addresses. During the summer and 
early fall hundreds of "farmer elevator picnics" are held. The 
programs consist of games, music and addresses on the topics 
most interesting to the family on the farm. 

It is these thousands of gatherings every year, together with 
the business experience acquired in .conducting the affairs of 
a corporation that are making the farmer a leader in the prog- 
ress of the West. In fact, so progressive has he become that 
he now owns his trade paper. The American Cooperative Journal, 
which is the official organ of the farmers' movement in all the 
grain belt states. 

What Will Future Bring? 

Will the producers be satisfied with what they have already 
accomplished? Civilization cannot stand still, and it must not 
go back. In 1908, George W. Perkins, in an address to the 
students of Columbia University, said: "It is almost heresy 
to say that competition is no longer the life of trade, but such 
has come to be the fact. The spirit of cooperation is upon us. 
It must of necessity be the next great form of business devel- 
opment and progress. ' ' 

Addressing the delegates of the National Grain Dealers' As- 
sociation at their annual meeting in Cincinnati, October 3rd, 
1907, Honorable Martin A. Knapp, then chairman of the Inter- 
state Commerce Commission and recently chief justice of the 
commerce court, said: "I am one of those dreamers who be- 
lieve that the conditions of our modern life, brought about by 
our marvelous systems of transportation and communication, 
are not and cannot be adjusted to the theory that competition 
is the life of trade. I believe that somehow and in some way 
we shall and must find a method of transferring our whole in- 
dustrial and transportation agencies from a competitive to a 
cooperative basis." 

These are largely my sentiments, and I believe, too, that the 
future of agriculture in America depends largely on the future 
of this economic and social movement. No intelligent man 
would think of belittling the great work of our agricultural col- 
leges and experiment stations. They have performed a mar- 
velous service to mankind, and yet this cooperative movement 
among the fruit and grain growers of the West, and the cotton 
planters of the South, has done as much to make agriculture a 



96 MARKETING AND FARM CREDITS 

science and a profession as all other forces combined. Theo- 
dore Roosevelt recognized the importance of this work when, 
on May 31, 1907, speaking' at Lansing, Michigan, on the anni- 
versary of the founding of the tirst agricultural college in the 
United States, he said : "A vast field is open for work by co- 
operative associations of farmers in dealing with the relations 
of the farm to transportation and to the distribution and man- 
ufacture of raw materials. It is only through such combina- 
tions that American farmers can develop to the full their social 
and economic power." 

The producers have so far done their part in the readjust- 
ment of economic conditions. They cannot, however, do for 
the consumer what he must do for himself. Cooperative or- 
ganizations — fruit growers, creameries, cheese factories, grain 
growers and vegetable growers — are waiting and ready to do 
business direct with cooperative organizations of consumers. 
Therefore, ^NFr, Consumer, in the parlance of the street, "It is 
up to you. 

Join Producer With Consumer Through Cooperation 

And here I reach the boundary line beyond which is forbid- 
den ground. But perhaps I may say that producers' coopera- 
tive organizations in the country and the consumers' coopera- 
tive organizations in the cities have so far helped each other 
never a whit. Consumei*s are not sufficiently organized in 
American cities to constitute a buying power — in fact, they 
are not organized at all. Here, in my estimation, is the key 
to the economic side of this entire marketing problem. One 
hundred cooperative grocery markets in Chicago, or any large 
city, under one management, would have a buying power, 
which, together with a more economic distribution, would re- 
duce the cost of table necessities at least 20 per cent, and would 
guarantee a fair price to every producers' organization with' 
which it did business. 

If this Conference will center all its influence and ingenuity 
for a time on the organization of cooperative associations of 
consumers in the cities in order that they may work directly 
with cooperative organizations of producers, I believe it will 
accomplish far more good than it can in any other way. Now 
is the time to act. Give cooperative marketing and the gen- 
eral principles of cooperation the stamp of approA'al, and then 
let us concentrate our energies upon the working out of some 
specific proposition. Cooperation in America is no doubt in 



W. M. STICKNEY 97 

the kindergarten stage. Other generations will see unfold that 
greater development which we now can only picture, but it is 
our duty to prepare the soil for the harvest in the years to 
come, and "shame and disgrace will be ours if in our eyes the 
light of high resolve is dimmed." 

7— M. F. C. 



MARKETING THE FARM PRODUCT 



THE ECONOMICS OF AGRICULTURE 

Carl Schurz Vrooman 
Assistant Secretary, The United States Department of Agriculture 

''Agricultural economics," the topic assigned to me, is a 
pretty broad topic. It is not only broad, but long and deep — 
.so big a subject indeed that it gives me a lot of leeway in speak- 
ing to you this morning — which I mean to take. In thij regard 
I am a bit like Napoleon Bonaparte is said to have been in the 
matter of a treaty which he had under consideration. One of 
his secretaries came to him and said, ' ' Sire, there is an ambiguity 
in this document. I think we had better have it re-written." 
' ' Leave it as it is, ' ' said Napoleon, ' ' or, if you are not sure that 
the ambiguity is there, put one in. "We may need it some time." 
I like the breadth of this subject because it gives me a chance to 
talk about most anything. 

Indeed, one or two points have occurred to me within the last 
hour that seem to me to be more important just now than any of 
the strictly agricultural economic questions, even more impor- 
tant just now than anything I might say to you on the question 
of marketing, though that is important indeed, and wiE be dis- 
cussed in due order. 

The annual agricultural output of this country is about 10 
billion dollars. We hear a good deal about "big business" these 
days, but agriculture is the biggest business of all. And mind 
you this 10 billion dollars is merely the price the farmer gets. 
"What it costs the consumer, heaven only knows ! Now the trans- 
portation of 10 million dollars' worth of products is no small 
matter. What it costs very vitally concerns both producer and 
consumer. Even the cost of railroad transportation under ordi- 
naiy conditions is a serious matter, though I have read some very 
laboriously written documents written to prove the contrary. 
But now I want to call your attention to some freight rates that 
make the most extortionate railroad freight rates pale into neg- 
ligibility. 

A Real Marketing Problem 

Under normal conditions the average cost of transporting a 
bushel of wheat from New York to Liverpool is 4 or 5 cents. For 
the past year the cost of transporting a bushel of wheat from 



102 MARKETING AND FARM CREDITS 

Ntnv York to Liverpool has averag>?d over 40 cents, an increase 
of over 1.000 per cent. There is a niarketiiisr proWeni for yon. 

Of coni'se, no department of this oonntry has direct control 
over freiirht rates on tlie liigh seas. Init the administration lias 
proposed a plan embodied in the so-called McAdoo Shipping Bill 
for enabling this countiy to secure an indirect control over such 
rates and to give it a five hand in shipping its prodncts to for- 
eign markets. I want every pei'son here this morning to realize 
how siguilicaut this bill is to the farmer and bnsiness man of 
this conntry. as well as to all American citizens, no matter whr.t 
their bnsiness. for this bill not only provides for the rehabilita- 
tion of the American merchant marine as a power in peace, but 
iUso carries a provision which is of the utmost importance from 
a naval standpoint, namely, that all the ships to be built or ac- 
quired by the government under this act shall be available as 
naval auxiliaries in time of war. 

We are told by some people that we do not need to do this ; that 
private industry and initiative will take care of the shipping 
problem. We have heard this for 50 years, and private in- 
dustry has done nothing about it. Last year the administration 
asked Congress to appropriate $45,000,000 for the purpose of 
buying or building a federal merchant marine to help dispose 
of our j> Inducts to foreign countries : but that bill was defeated 
by a pei*sistent tilibuster. aiul during the year just passed the 
Americaji people have pi\>bably lost more than $45,000,000 
tlu'ough excessive freight rates or the lack of ships to carry their 
products to foreign nmrkets. If this measure had passed, we 
might have saved in one year more than the entire cost of the 
lleet contemplated. Take the matter of cotton. The cost of 
transporting cotton from New York to Liverpool has gone up 
700 per cent, and yet there are business men in this country who 
take their cue from shipping interests located in New York and 
in foreign capitals, and ignore the primary necessity of the busi- 
ness of this country, namely, that we be able to carry our proti- 
ncts to the markets of the world without paying extortionate 
transportation charges. 

America Weak on Shipping- Matters 

Our complete dependence upon the ships of other nations to 
carry our produce to foreign markets has long put us in an inex- 
cusably weak and humiliating position. It was estimated by the 
congressional committee on merchant marine and tisheries that 



CARL SCHURZ VROOMAN IO3 

this country pays annually between 200 million and 300 million 
dollars to foreign ships for carrying American freight. Ninety- 
two per cent of our ocean-borne freight is carried in foreign bot- 
toms. We cannot at one^^troke extricate ourselves from our pres- 
ent economic dependence upon foreign ship owners. The most 
we can do is to launch a new American shipping policy at once, 
and then push that until our independence in ocean transjjorta- 
tion is achieved. 

There are 2 possible ways of achieving this independence; 
either by granting generous subsidies of the people's money to 
various private shipping concerns, or by taking federal money 
and building or buying a fleet of merchant vessels to be owned by 
the federal government and either leased to shipping corporations 
or operated by the government itself. 

The first plan, of building up a merchant marine by subvention 
or subsidy, had the energetic support of various past administra- 
tions, but so bitterly and so persistently have the people of the 
country been opposed to this form of paternalism, that these 
measures have uniformly been defeated. Unquestionably, if we 
are to build up a merchant marine, it must be by some other 
method. The McAdoo Shipping Bill is the only bill yet proposed 
that is based upon sound economics, common sense and common 
justice, and it is the only bill that stands any chance of passage 
by this Congress. Since its defeat at the last session of Congress 
it has been carefully revised and improved in a number of essen- 
tial particulars. If you want reasonable freight rates, and ade- 
quate shipping facilities, get behind this administration's ship- 
ping bill. But if you like to pay 1,000 per cent increase on your 
freight rates, that is your privilege. 

Congress and the Grain Inspection Bill 

Another bill coming up before Congress deals with the question 
of grain inspection. I am a believer in a national system of fed- 
eral inspection, but I have looked into the matter very carefully 
and talked with some leading congressmen and senators and 
others, and my very decided impression is that it will be impos- 
sible during the next session to get through a bill providing for a 
complete federal inspection system, the kind I would like to see. 
But it will be possible, probably, if the friends of this movement 
get behind it, to put forward a federal supervision bill like the 
Moss bill. That is a step in the right direction ; a very large and 
important step. It does not go the whole distance, but it goes a 



104 MARKETING AND FARM CREDITS 

part of the way, and as business men, as men who want to make 
some progress this year, and who hope to make more progress 
next year, let's take this up and get the very best bill we are 
capable of getting in the interest of grain standardization on a 
rational and just basis. 

You know as well as I do, that the present Interstate Commerce 
Commission is the result of a long series of congressional enact- 
ments, which gradually worked out the present system of federal 
regulation of railways. It would have been very nice if we could 
have gotten the whole thing at one jump, but, unfortunately, we 
are not built that way. We have to feel our way a step at a time 
and gradually perfect our legislation. And, therefore, I hope 
that those of you who like myself are in favor of federal inspec- 
tion of grain, when you talk with your congressmen or senators, 
will say to them, "If you can't get a complete bill according to 
the plans and specifications which we think are the correct ones, 
and can get one which will incorporate some of the things we are 
fighting for, get it, and we wiU have a basis to work on. ' ' 

The United States Department of Agriculture is as interested 
as you are in this great marketing problem. The federal depart- 
ment up to the last 3 years did very little with regard to market- 
ing problems, just as the state agricultural colleges of the country 
paid very little attention to marketing problems until very re- 
cently. But a couple of years ago Congi-ess passed a law provid- 
ing money for the creation of an ' ' Office of Markets and Rural Or- 
ganization" in the department of agriculture, and since then the 
department has been working hard upon a variety of problems in 
agricultural economics, among them taking up most of the prob- 
lems of marketing that you have been dealing with at this Con- 
gress. 

The farmers of the country are suffering from a stiff and cum- 
bersome system of distribution. Part and parcel with this gen- 
eral problem of distribution, or intimately related to it, are a 
whole brood of economic problems, each of which is of vital con- 
cern to the American farmer: The problem of how to grade 
farm products so as to get the highest price for the entire output ; 
the problem of how properly to pack and brand the shipments ; of 
how to select markets and make shipments ; of how to sell to the 
best advantage ; of how to sell cooperatively with other farmers ; 
of how to buy cooperatively ; of how to get better credit through 
cooperative effort — these are some of the problems that must be 



CARL SCHURZ VROOMAN 105 

solved before we can boast that our agriculture is on a sound 
economic basis. 

New Forces at Work in Agriciilture 

The legacy of the century past to agriculture has been agron- 
omy — a vast but largely undigested and uncoordinated mass of 
information about how to grow things. Within the past 2 years 
there have been set in motion the forces that will, we believe, lib- 
erate to the farmers of the country this mass of largely inert 
knowledge and make it available for practical use. In those 2 
years 2 things have been done by Congress which to my mind 
are equal in importance to all the other things that it has done for 
agriculture in the 50 years past: The passage of the Smith- 
Lever Bill and the creation of the office of markets and rural or- 
ganization. 

The Smith-Lever law virtually means the appointment of a 
deputy secretary of agriculture for each county in this land. It 
means that the department has at last got into personal touch 
with the farmers themselves. The creation of the office of mar- 
kets and rural organization means that the department has at last 
ceased to focus all its vast energies upon problems of production 
and is henceforth going to cope as successfully with the equally 
important problems of distribution. 

The woof to the warp of the marketing question is the problem 
of rural cooperation. The spread of the cooperative movement 
through the Middle West and on the Pacific coast has been encour- 
aging, but there are many difficulties that must be surmounted 
before the cooperative movement can have a free hand. For one 
thing the laws of many of our states are such as to impose unjust 
restrictions upon such organizations. Then too, this is a very in- 
dividualistic country, and it is a difficult matter to get the people, 
to do team work for the common good. You cannot make a rope 
out of loose grains of sand. Unless the farmers of this country 
support cooperation we shall not have cooperation. 

Policy of Government to Aid Cooperation 

The department is doing its utmost to foster the cooperative 
movement and to put it on a sound economic basis. We are trying 
to impress upon the farmers of this country the fact that the man 
who is too suspicious and short-sighted to cooperate with his neigh- 
bors in the pursuit of a common end, is going to be the loser in the 



106 MARKETING AND FARM CREDITS 

long run. We are working along this line in all parts of tlie coun- 
try. 

"We find that in some localities the farmers are responding mag- 
nificently to this new movement, and in other localities they are 
not. And hence we are telling our county agents and our other 
men who go throughout the country that they must imbue the 
farmer with the spirit of cooperation. It is folly for us to dream 
beautiful dreams of national economic and social efficiency, un- 
less we are able, right in our ovm township and in our own comity, 
to get together with our neighbors, forget our suspicions of 
them, forget our little points of difference, and set to work for 
the common salvation, hand in hand and shoulder to shoulder. 
That is the spirit which will "^nn — and that is the onlij spirit 
which will win. 

The work that the federal department can do, the work that an 
organization like yours can do, is very important, but the greatest 
work must come from the people themselves — the initiative must 
come from the people. We cannot go out over the country and 
Prussianize the farmers, and roll them into little groups of co- . 
operative enterprises. What we can do is very important, but 
it is strictly limited. We are ready to cooperate with the farmer 
in promoting a scientific agriculture, in promoting a scientific 
system of marketing, and in building up a new situation in the 
rural districts of this country, based upon the great principles 
of brotherhood and cooperation — ^but we can only suggest and 
help. 

We are your creatures, your servant, your instrument. We 
can be of service to you, but the amount of ser\dce you get from 
us will depend upon the amount of energy, of intelligence which 
you yourself put into the great work of making of the New Agri- 
culture something more than a mere movement for the increase 
in the size of our crops, something more even than a gi'eat move- 
ment to increase the size of our bank accounts — a great movement 
which "udll mean to the coming century a rejuvenation of rural 
civilization upon a new basis. And if the farmers will get the 
economic and social conception of their mission and ours, the next 
25 years will see in this country a degree of material prosperity 
that the world has never seen before. And that material pros- 
perity will be used merely as the foundations upon which to build 
a mental, social and spiritual prosperity, which after all, is the 
only thing that is really permanent, or that is really supremely 
worth our while. 



GEORGE P. HAMPTON 107 



THE NATIONAL MARKETING PROBLEM 

George P. Hampton 

Managing Director, The National Marketing Committee and Editor of 
The Farmers' Forum 

I have come to this Conference, because I believe you Avould 
not have assembled here if you were not in earnest in your de- 
sire to aid in solving this great problem, and because I feel that 
among you may be found the master minds who will solve the 
problem, and because I feel I can present a few facts worthy 
of your consideration on the main factors that handicap the 
better distribution of farm products and some suggestions for 
increasing the efficiency of present distribution agencies, or per- 
haps I should say, those agencies which I believe can wield the 
most potent influences in securing the establishment of better 
marketing methods. 

In 1906, at the request of the national master and the executive 
committee, I attended the annual meeting of the National Grange 
at Denver, for the purpose of consultation on formulating the 
legislative program for the ensuing year. For some time past 
I had felt that the problems of distribution, as they affect the 
producers, were not receiving their full share of attention, ann 
that it was hopeless to expect any general increase in the farm- 
ers' prosperity until distribution was reorganized on a more equi- 
table basis. On this question as I presented it the officers of the 
National Grange were in complete accord, and at the request of 
the chairman of the executive committee I drafted the following 
section of the executive committee report : 

' ' Distribution of Farm Products. ' ' 

' ' The statement is frequently made in our farm papers that 
the most important econmic subject that confronts the farm- 
ers of America is 'scientific agriculture,' or, in other words, 
the science of making two blades of grass grow where one 
grew before. We disagree with their opinions. The great 
problems of production, not alone in agriculture, but in all 
lines of industry, have occupied by far the largest attention 
of the world for a long time. And these productive prob- 
lems, and scientific farming especially, will undoubtedly re- 



108 MARKETING AND FARM CREDITS 

ceive iiicreasod attention. Xotwithstauding this inereasiugr in- 
terest in improving prodnetive methods, the progressive 
farmer no longer considers the question of how to produce 
more as heing nearly so important as the other great question. 
of how to keep for himself a larger share of the profits of 
what he has already produced. 

' ' The great problem of this day and generation is distribu- 
tion ; equitable distribution or the 'square deal' (as Presi- 
dent Roosevelt has so happily phrased it). The producer 
and the consumer must be brought closer together, and the 
special privilege classes, who rob both, must be eliminated. 
Not until the 'square deal' is fully established and monopoly 
completely annihilated, can the question of production again 
attain to its naturally right position of first place. Until 
then, distribution must be oui- chief concern. ' ' 

This was unanimously adopted by the National Grange and 
subsequently endorsed by eveiy state Grange at their next fol- 
lowing annual meetings, and since then, with- increased emphasis, 
it has been the declared policy of the Grange. 

I am con^^nced that the thing-s of first importance in securing 
the quickest, most thoroughgoing, and permanent improvement 
in the distribution of fann products, are : 

1. Remedial legislation. "What that legislation should be has, 
in the main, been made clearly apparent in the addresses and dis- 
cussions of this conference. 

2. Higher efficiency in the existing educational and denoni- 
strational agencies, governmental and private, by means of a 
central agency, or clearinghouse, the main function of wliicli shall 
be to assist in coordinating the activities of the various agencies,. 
while leaving the independence of each unimpaired. 

3. The development of effective team-work in the present agen 
eies for distribution of farm products, through a better under- 
standing of their right relation to the f)roblem, as a whole, and by 
demonstrating that the interests and profits of each will be best 
served by operating from the point of view of team work. 

Movements Should Be Coordinated 

The lack of effective cooperation of the many, very many,, 
agencies — governmental and private, national, state and local — 
now at work to improve marketing conditions, is the greatest de- 
fect in the present marketing situation. If these educational 



GEORGE P. HAMPTON 109 

and demonstrational agencies fail to show efficiency in coopera- 
tion, and fail to set the example of high grade team-work, how can 
the rank and file of producers and consumers be expected to co- 
operate intelligently upon any broad lines? While such condi- 
tions prevail, the task of improving marketing conditions in any 
large way is well nigh hopeless. On the other hand, I can conceive 
of no more powerful inflvience to stimulate and speed forward the 
cooperation of producers and consumers in improving marketing 
conditions, than that offered by positive evidence that the most 
important of the various educational and demonstrational agen- 
cies are working together with their activities intelligently coordi- 
nated. 

The activities of these various agencies should coordinate as 
automatically and as freely as those of bankers in our banking 
system, while the independence of each should be just as surely 
maintained. 

To perform this function of a general clearing house is the 
central purpose of The National Marketing Committee. We 
realize, however, that with the growth of the work, an organiza- 
tion, bigger and broader in its scope, will be needed, and one of 
the main activities of The National Marketing Committee is to 
assist in securing the establishment on some broad plan yet to be 
developed, of a national council, or chamber of agriculture. 
With a national organization of undoubted representative 
strength, the important next steps of securing corresponding 
"clearing houses" in the various states and localities would fol- 
low naturally in due course. 

The getting-together in this way of what I may call the high- 
est forces of agriculture, is the first and most important step in 
improving marketing conditions, for it makes the accomplishment 
of all other steps easier. 

The present machinery of distribution can be geared up to a 
much higher condition of efficiency and much of the present 
enormous waste in marketing farm products eliminated by some 
remedial legislation, and by showing our bankers, merchants, 
and transportation managers, that the improvement of market- 
ing methods means increased profits for them. Their present 
several viewpoints of the marketing problem are wrong, and as T 
have come to see the problem, it is not so much a matter of edu- 
cating the producer and the consumer, as of educating the banker, 
merchant and transportation manager. Distribution of farm 
products is a question of team work, and the banker, merchant 



110 MARKETING .VXD FAR:M CREDITS 

mill trnnsportation airotit nro important moiiibovs of the iuh'os- 
sijn'v toaui for otlioiont sorvieo. 

The main oauso of inotlii.'ioiu'y in prosont iwarkotini:: atroiu'ios is 
tJuvt the moiulvrs of tlie toain have failed to soo theiv risfht rela- 
tionship to the toain. or even to nvogiiize thoy nvoiv luoiubors of 
a toa.iu. Ivu'h has "irone it alone" seekinir only his own advan- 
ta4rv\ anvl >vith. at best, a piXM* iniderstandinir of the ritrhts of the 
other nuMnboi-s of the team. Sneli an attitnde. intentional or miin- 
tentional. is utterly destnietive o( team sueeess, and inevitably re- 
aets on every uuMuber of the team. It is written into the very 
nature of thinirs that in any group having a eon\mon purpose an 
injury to one is the eoneern of all. and_that in the long run all will 
go forwanl. or fall, together. Couseq\iently to aid in perfecting 
the team Avork of pivseut distributii\g agents is a very importaiu 
part of the work for better nmrketing. 

This phase of the problem is worthy of your most earnest study 
for I au\ sure you can appreciate the n\ighty power of the intlu- 
enees that will be brought to bear in solving the marketing ptvb- 
lems, if. with new view points, our bankers, merchants, and trans- 
port^nion mauagei'S can see clearly large pix'^tits to then\selves in 
laking hold of the work. Time will only permit me to bi'ietly in- 
dicate \\hat the view point and policy of these various agencies 
should be. 

Importance of Transportiition Agencies 

A low Ci>st. highly etticient transportation service is an abso- 
lutely necessary part of an economically so\n\d system for the 
marketing of farm pivduets. To render such a service is the na- 
tural function of the raili^oads. but this service will never be 
brought up to its highest state of efticiency until railroad mau- 
agei'S fully realize that the perfecting of the railroad's part in the 
developmont of better marketing, means increased dividends, and 
that the great dividend pnxiucer is naturally local fivight. The 
failuiv of the railroads to realize this has been one of the main 
causes of the evils in both production and distribution from which 
we now sutf er. 

The old raihvad policy of s;\criticing the short haul for the long 
haul, was destructive to the development of a national marketing 
system, but it Avas sound in its iV(,\>gnition of the supreme import- 
ance of freight as the reveinie producer. The error ^^'a« in the 
failure to see that the main function of the railroad was to serve 
tlie country through which it ran. and that in the long run kx^al 



GEORGE P. HAMPTON HI 

freif^ht must iuovitahly ho, the dividend producer. The failure to 
adopt a d(!V(!lopinent i)olic.y with this end in view has heen disas- 
trous both to the country and to the railroads. 

Tliat railroad managers do not yet grasp the full importance of 
the j)oli(ty of concentrating on the development of local freight is 
shown by the (vfforts made to increase j)asseng(!r rates and to se- 
cure increased revenue from the small package business. Both 
the passenger traffic and the small package traffic are natural 
freight i)roducers, and the greater the volume of both, the greater 
the volume of freight, and freight, I repeat, is tin; dividend pro- 
ducer for most of our railroads. Therefore, to develop local 
f r(!ight and increase dividends railroad managers should do every 
thing possibh; to increase the local passenger and small package 
traffic. The common sense way of doing this is to reduce the 
rates for l)oth to the lowest possible level, while at the same time 
giving to both the highest quality of service. A clear understand- 
ing on the part of th(! railroad manager as to the natural relation- 
ship of the small package business to tihe freight traffic will start 
railroads on a new policy of development, a development which 
will make them self interested workers for better marketing 
methods. 

Attitude of Merchant Class 

The attitude of merchants to the problem of distribution of 
farm products has been, generally speaking, that of merely dis- 
interested onlookers, but before any great advance in improving 
present marketing methods can be made, this attitude must be 
changed. And it will be changed quickly when merchants 
awaken to a realization that the right solution of the problems 
of marketing of farm products means greatly increased and 
permanent prosperity for themselves. On all sides we hear to- 
day of the tremendous boom in prosperity that is reaching into 
every section of the country and affecting all branches of busi- 
ness. And the solid sense of security that is felt in the stability 
of this prosperity is in the knowledge that the producers are 
prosperous and have money with which to buy freely. But there 
can be no surety of the permanence of this condition until the 
marketing of farm products is adjusted on a basis that insures 
the farmer getting at all times, and under all conditions, a just 
return for the sale of his produce. No time, effort, or money 
given to any cause is so sure a profit producer for our merchants, 
big and little, as that given to aiding in developing better mar- 



112 MARKETING AND FARM CREDITS 

keting methads, for it benefits both tbe producer and the con- 
sumer, and increases the purchasing power of each. 

From the point of view of sound merchandising — and the 
marketing of farm products is merchandising — merchants gen- 
erally have had the wrong point of view, and consequently have 
followed the wrong policy in their attitude toward banks and 
bank credit. It is perfectly rational for the banker, per se, to 
follow the policy of forcing the interest rate up to high levels 
and to make every effort to maintain it there, but for the mer- 
chant such a policy is most irrational, for before all else, he is a 
boiTower, and his interest lies in securing the very lowest pos- 
sible interest rates. In a general way merchants know this, but 
in practice they invariably view banking through the eyes of the 
banker, that is, of the lender, and not as merchants, that is, bor- 
rowers. Thus, although merchants constitute a majority of the 
directors of most banks, their attitude as such is invariably that 
of bankers, and not merchants. If it were the fi-xed policy of our 
merchants always to study the credit system from the mer- 
chants' — the borrower's standpoint — many of our credit prob- 
lems would be easily solved, and particularly those that relate 
to the marketing problem. The perfection of the British com- 
mercial credit machinery is due to the fact that the British mer- 
chants have seen to it that the interest of the borrower has been 
as keenly looked after and safeguarded as that of the lender, 
the banker. That is to say, the British merchant is always a 
merchant, even when a bank director, and the view point, 
whether that of lender or borrower, makes all the difference in 
the results obtained. The merchant, the community, will pros- 
per most which, other things being equal, has the lowest interest 
rate and the best credit facilities. 

Banker Necessary Factor in Marketing 

The banker is also a necessary factor in the development of 
better marketing, and when the banker realizes that better mar- 
keting can be made a sure profit producer for banks, he will be 
the chief booster for better marketing. Banking can be con- 
ducted eitlier on the policy of charging all the traffic will bear, 
or of giving the largest possible service for the least money con- 
sistent with a reasonable profit. The first policy inevitably 
tends to high interest rates with a restricted volume of business, 
and the other to low interest rates with a large volume of busi- 
ness. Of course the banker adopts the policy which he be- 



DAVID FRIDAY 113 

lieves will yield the greatest profit. Generally speaking the 
question has been decided in favor of the high interest rate, and 
may be said to have developed a state of mind that makes it al- 
most impossible for our bankers to see banking from the other 
point of view. But the other policy is the policy of some of the 
largest and most successful banks in the world. It is the policy 
which in general prevails throughout Europe, and it is the pol- 
icy our American bankers must adopt if they are to render the 
best service in the marketing of farm products and in improving 
marketing methods. 

A banking policy of reducing the interest rate as low as pos- 
sible calls for a higher order of banking than the opposite pol- 
icy, and requires greater alertness in serving the community. 
But it is the banking which develops the spirit that puts the 
right punch into all the activities that jnake for general pros- 
perity, and it is the banking which in the long run, in any agri- 
cultural community, will yield the greatest profit. It is the 
policy which will make the banker, of necessity, a booster for 
better marketing. It is a change that is sure to come with a 
better knowledge on the part of merchants as to their right re- 
lationship to banks, and those bankers will show their wisdom 
and foresight who take time by the forelock, and at once direct 
their energies to aid in the solution of marketing problems. 



THE ECONOMIC FUNCTION OF THE 
MIDDLEMAN* 

David Friday 
Professor of Political Economy, University of Michigan 

A lack of organization has long been recognized as the pe- 
culiar and principal weakness of the agricultural industry. 
Today, we have everywhere evidences that a consciousness of 
this lack has pervaded the agricultural classes, or at least the 
more intelligent part thereof and has aroused emotions charac- 
terized by a vividness and fervor that give the movement for 
rural organization many of the characteristics which we are 



♦Delivered before the second National Conference on Marketing 
and Farm Credits at Chicago, in April, 1914, in joint program with 
the Western Economic Society. 

8— M. F. C. 



114 MARKETING AND FARM CREDITS 

•wont to associate with a religions crusade. The magazines, 
realizing the keen feeling that exists upon this subject, see in 
it a fertile topic for the exploitation of the magazine purchaser. 
The dispensers-for-a-price of ideas, commonly known as popu- 
lar magazine Avriters, are grasping the opportunity with avid- 
ity and the whole field of journalism confronts us with enter- 
taining and striking statements of the evils res-ulting from the 
lack of rural organization. 

The aspect of this that makes peculiar appeal to those of us 
who are city dAvellers is the necessity for organization in the 
matter of marketing the necessities of life. ^Ye are confronted 
by the statement that for every dollar, paid by the ultimate 
consumer, only 35 cents gets into the pocket of that producer 
who has dug it out of the ground; he, who has endured the 
groaning and the backache and the sweating of it all — the 
farmer. At the mere statement of this fact, we are expected 
to be transfixed with consternation. This question "of the 
division of the consumer's dollar into 65 cents for the handlers 
and 35 cents for the producers is the greatest financial issue 
of the age," we are told in a recent number of, what I have 
been pleased to consider, the leading farm journal in America. 
"It is also," the editorial continues, "the great moral issue of 
American agriculture for the present system of division is un- 
just and wicked." The 65 cents measures, as it were, the 
inequity of the system and of the age, while the 35 cents 
represents the justice embodied therein. A sorry showing in- 
deed for modern civilization as respects the market end of its 
doings and strivings. The worst of it is, we are told, that 
this thing has continued for a quarter of a century or more, 
and we have been sitting all unwittingly and unknowingly 
while the inequity has gradually grown and waxed fat. 

Agriculture is one of the industries, perhaps the one industry, 
that has produced no millionaires. Surely there are reasons 
for this and the reason, we are told, is the organization of the 
produce market — exploiting the great numbers, who stand at 
the initiation and at the termination of the industrial process, 
to the enriching of those who have interposed themselves be- 
tween the 2 ends. Government aid is being invoked and 
both federal and state governments are actively organizing 
bureaus for the study of the matter. It is demanded that they 
devise ways and means of substituting for the present sys- 
tem "Cooperative Organization," which shall reduce the cost 
of living to the consumer and raise the price of the farmer's 



DAVID FRIDAY 115 

product — all to the redistribution of purchasing power, and to 
the increase of happiness. 

Need of Strong Men in Market Places 

The farmer is told that he has not lacked primarily in enter- 
prise and in intelligence in the field of production, that those 
who have the betterment of agriculture at heart "may talk 2 
blades of grass until they are green in the face," but 'one 
strong man in the market place, showing how to get a fair 
price for one blade of hay will do us more good than a thou- 
sand men teaching the 2 blades of grass theory"; not the in- 
crease of quantity and improvement of quality of the product, 
but the proper marketing of the same is proclaimed as the 
dominant problem of the farmer. 

The middleman forms the special object of the anathemas of 
the reformers and the particular target of the rhetorical art- 
ists, whose pot-boiling activities serve to keep the emotional 
state at the proper temperature. It is he who interposes him- 
self between the farmer and the ultimate consumer and is di- 
rectly and immediately responsible for this wide difference of 
65 cents that exists between the consumer's dollar and the pro- 
ducer's remuneration. "Parasite" is the favorite name ap- 
plied to him, and "non-producer" — one who lives and waxes 
fat by buying cheap and selling dear, by impoverishing the 
masses to the anihilation of happiness and comfort. For is it 
not clear to any one who will open his eyes that the potatoes 
that the grocer leaves at my cellar — that the eggs, the butter, 
the apples, are no whit different in size, or quality, or power 
of sustaining life, than they were when they left the farmer's 
hands? They are the identical products in no wise changed. 
Why, then, should I be asked to pay $1 for that which the farm- 
er has produced for 35 cents? The productive act was com- 
pleted when they left the farm and all the addition in price was 
not paid to support production, but to furnish pro.fit to middle- 
men. 

The remedy is obvious, we are told, and will present itself as 
soon as the situation is clearly understood. The middleman, 
through his close study of the market, through the exercise of 
his wits upon methods of jnanipulating prices, underpaying the 
producer, and overdharging the consumer, has succeeded in 
some manner in abstracting 65 cents of the value of the goods. 
He must be eliminated. What more obvious way of doing this 



116 MARKETING AND FARM CREDITS 

present* itself thau orgauizatiou — orgauizatiou of markets? 
Let us substitute a single transaction for the 3 or even 5 tran- 
aetious of purchase and sale -^vhich we at present find consum- 
mated in bringing the jar of butter, the bushel of potatoes or 
apples, the dozen of eggs, from producer to consumer. To 
quote from a prominent daily newspaper, "give the farmer a 
parcels post to begin with, let him send his dozen eggs or his 
pair of chickens direct to the man who wants to eat them, or, 
at least, to the retail merchant, cut out the commission mer- 
chant, the wholesaler, and a few of the city parasites that live 
on the farmer." The elimination of the middleman has be- 
come a principle which seems to have all the importance in 
solving the industrial ills that vex humanity that the salvation 
of the soul had in old-fashioned Methodist doctrine. 

To any one who has observed these proposals for remedying 
the inequalities of the system, the feeling that even though the 
middleman were the black sheep that he is here painted, he 
should not be condemned without at least being heard; for we 
ought to make what defense we can for him before meting out 
his punishment, to the end that we may not act with undue 
severity in the matter. 

Is the Middlemaji aji Exploiter? 

Have we really discovered a great truth concerning the 
wastefulness of the present organization of industry? Per- 
haps. But oftentimes people imagine they have discovered 
such truths, when they have only made a shallow analysis of 
the situation and have not gotten at the true inwardness of the 
matter. Does the middleman perform any function among us 
except that of exploitation? Can his activities and his func- 
tions be dispensed with by merely passing the wand of organ- 
ization over the situation, or are his operations a vital portion 
of our whole industrial organization, without which it cannot 
maintain its present state of productive efficiency? And if. 
perchance, it be found that his function is an indispensable 
one in the modern organization of industry, then it behooves 
us to question closely whether conscious organization on the 
pai't of producers, state controlled organization even, will per- 
form those functions as economically as they are now per- 
formed: whether the producer and consumer can assume this 
function without detriment to other activities which the pro- 
ducer can never delegate to a separate class, as he has dele- 



DAVID FRIDAY HJ 

gated to the middleman the task of responsibility and risk of 
seeking out the consumer. 

To me the fact that only 35 cents of the consumer's dollar 
goes to the producer proves absolutely nothing with respect to 
the inequity of the middleman's profits or of the present sys- 
tem of marketing. It is a striking fact, without doubt, but so 
is the fact that I am able to buy sugar at 5 cents a pound, or 
that I buy a box of friction matches of a very superior grade 
for the trifling sum of 5 cents. These are startling facts of 
industrial attainment. But they are not iniquitous in the 
least. 

What is needed to pass intelligent judgment upon this whole 
situation is a careful examination of the entire process of in- 
dustrial organization for the purpose of seeking out the casual 
connections that exist between different activities and the total 
product forthcoming. It may be that the present methods of 
marketing may be found to be wasteful and that they may be 
found to be involving an undue amount of risk on the part of 
the middleman, that they may involve a useless duplication of 
effort, but let us not conclude hastily that the system needs 
changing and above all let us not inaugurate a new system of 
marketing and distributing the products of the farm until we 
have first sought out the things that are necessary and inevi- 
table for the unimpaired and effective working of the whole or- 
ganization. Then we shall be forewarned and shall not be dis- 
appointed if certain disagreeable facts and situations have to 
be faced later. 

Function of the Middleman 

What, then, is the function of the middleman? His func- 
tion cannot be understood apart from a discussion of the na- 
ture and organization of modern industry. First of all, our 
present industrial order is a cooperative order. We are not 
formally and consciously organized for purposes of coopera- 
tion, but each of us is engaged in the production of a compara- 
tively small number of things which, for the most part, are in- 
tended to satisfy the wants of others. This cooperation is ef- 
fected without conscious agreement. It is spontaneous, un- 
conscious — each man producing some commodity or service^ 
and exchanging it for the commodities and services produced 
by others. The farmer who is producing potatoes, wheat or 
meat, is cooperating, so to speak, with the producer' of furni- 
ture, clothing and farm implements. They are doing things 



lis MARKETING AND FARM CREDITS 

for oaoh otlior. This is the essential eharaeteristie of all eo- 
oporatioii. 

What is the advautagfe of this cooperative organization of 
industry? ^Yhy does not each individual in modern industry 
satisfy his oAvn wants? The answer is simple. This coopera- 
tion makes possible a subdivision of tasks resulting in a very 
high degree of specialization. This division of labor and the 
resulting increase in production brought about by specializa- 
tion lies at the very foundation of our etfectiveness in produc- 
tion. It is the secret of our modern productive etticiency. 
That we are etfective in turning our product is universally con- 
ceded. No other age has seen even the remotest approach to 
it. The production of all kinds of goods through the appli- 
cation of land, labor, and capital has been multiplied many 
fold, by increasing specialization and the resultant improve- 
jnent m technical methods, made possible through transport-a- 
tion and the organization of a world-wide market. But pro- 
duction does not consummate the industrial process. Goods 
are useless until they have been placed in the hands of those 
who are to consume them. This is the end of all productive 
activity, for the goods not consumed are wasted. But let us 
remember, too, that the consumer of a particular class of goods 
is in turn a producer who must likewise tind consumers for his 
product. "We have not cooperated until the products are 
placed in the hands of those who are desirous of consuming 
them. The cooperation between the farmer and the furniture- 
maker is not effected imtil the furniture-maker has placed his 
product in the hands of the farmer and vice versa. Goods 
must be gotten into the hands of the consumers before the co- 
operation and its resulting benetits in the way of increased 
product have served their purpose. A thousand bushels of 
wheat or of peaches have but little value to the farmer for pur- 
poses of consumption, beyond the value which he would de- 
rive from a hundred bushels. The tailor who spends all his 
time making frock coats and never wears one has derived no 
beneiit from his industry until those frock coats have gotten for 
him the means of livelihood. 

IVIiddleman Is Useful to Society 

Somehow the product of the various specialized producers 
in industry must be put in the hands of the consumer. This 
is effected in present-day industry through exchange. The 
seeking out of a consumer for the product of the producer and 



DAVID FRIDAY 119 

the finding of the desired products for this same individual 
turned consumer must be the task of some one in industrial so- 
ciety. It would be possible, no doubt, for the producer to 
sally forth with his goods to seek people who had the goods 
that he wanted in return, but no one doubts that this would be 
a wasteful system. Just so is it possible for the farmer to seek 
out the consumer in the city, who desires his products, convey 
these to him by parcels post, but the most prosperous farmers 
that I have known would much rather pay a liberal portion of 
the price collected from the man in the city, than to dissipate 
their productive energies and assume the risks of seeking out 
the consumer. Likewise, when the farmer in turn becomes the 
purchaser, he is willing to pay handsomely in order to be re- 
lieved of the necessity of finding the various producers of the 
goods that he in turn desires to consume. This is the function 
of the middleman. And it is just as necessary a function, one 
just as indispensable to the effective organization of indus- 
try under this system of cooperative specialization as any other 
productive operation. Exchange, trade, commerce play an 
essential part in modern industrial society in that it makes pos- 
sible cooperation and specialization, supplying the process or 
system of processes whereby this cooperation is effected. The 
65 cents which marks the difference between the price which 
the consumer pays and that which the producer receives is the 
amount which both these persons pay in order to be relieved 
from the necessity of finding the consumers for our goods, on 
the one hand, and the producers of the goods that we desire, 
on the other. 

In much of the writing on this subject, it seems to be abso- 
lutely unquestioned that the producer and the consumer, 
through conscious agreement, can eliminate the middleman to 
the promotion of economy. I quote from the report of the 
Massachusetts commission on the cost of living, dated May, 
1910: 

''It (the parcels post plan) will without doubt act bene- 
ficially to reduce the prices of many articles consumed or 
used in productive processes by the farmer. And it will 
thus reduce his living expenses and the cost of production 
of the products he puts on the market. In principle, the 
economy of the plan is heifond percDdventure. The only ques- 
tion is as to economy and efficiency in details of operation. 
No doubt many changes must be made in any foreign sys- 
tem before it can be successfully adapted to our needs, but 



120 MARKETING AND FARM CREDITS 

tliat a plan of admiiiistratioii cau be mapped out after a fair 
trial, there is just as little doubt. The point that needs em- 
phasis is that the interest of the consumer of farm produce 
and of the farmer that produces it are one and the same in 
as far as a cheap distributed food supply is concerned. " 

The striking thing about the quotation is that its writer 
deems it superfluous to go to the trouble of demonstrating the 
"economy of the plan is beyond peradventure." It seems per- 
fectly obvious to him that a direct connection between producer 
and ultimate consumer -svill effect a cheapening of the food sup- 
ply. This is the ordinary way of regarding the matter on the 
part of the general public. Surely, they seem to reason, if 
one transaction of buying and selling be substituted for 3 or 5, 
and thus 3 or 5 profits be eliminated, the result must be in- 
evitably a beneficial one, because it is correspondingly cheap- 
ened. This is an agreeable fallacy, for its overlooks entirely 
the reaction on the field of production, for both producer and 
consumer. The process of seeking out and delivering goods 
from one of these parties to the other is one that is time-consum- 
ing, that involves considerable cost of labor and a large ele- 
ment of risk. This cost is one that is necessary, and inevitably 
connected with production, and is not one that depends to any 
considerable extent upon the present organization of the mar- 
ket. 

There is in the popular mind a serious lack of understanding 
of the difference between a gambling risk and a risk inevitably 
connected Mith production. CertaiQ risks, such as the likeli- 
hood of price changes for the wheat crop, produced during 
the previous summer, but not to be consumed for some 9 or 
10 months, are inevitable and cannot be avoided by any or- 
ganization of industry. There is always serious risk of price 
changes on the produce market from time to time, which is quite 
as inevitable. Xo one knows better than the grower or shipper 
of melons, for example, what a tremendous change in price re- 
sults from a mere fall in temperature during the melon sea- 
son. Any separation of the market from the producer in time 
or space brings inevitable risks, and involves the expenditure 
of time and money : this expenditure is inevitable. 

Farmer May Not Be Able to Shoulder Distributive Costs 

It is open to serious question whether the farmer and the 
ultimate consumer can shoulder these costs and suft'er the bur- 
den of these disadvantages more cheaply than they are at 



DAVID FRIDAY 121 

present being shouldered by the middleman. The act of pro- 
ducing is one which the farmer will never be able to delegate 
to a second party without ceasing to be a farmer. Every di- 
version of attention or productive effort or capital from the 
field of production to that of exchange must inevitably mean a 
lessening of efficiency in the productive field. And, further, 
the cheapening in the cost of distributing the product which is 
brought about by the diversion of such productive factors must 
be scrutinized closely to make sure that the loss in productive 
efficiency does not more than counterbalance the saving in dis- 
tribution. As was said above, the fact that only 35 cents of 
the consumer's dollar gets into "the pocket of the farmer is a 
striking fact, but not necessarily a proof of inequity or lack 
of economy. 

Middleman May Be Highly Efficient 

The remarkable thing is that the farmer has under the mod- 
ern system of organization of industry and because of it been 
able to develop such efficiency in production by being relieved 
of the necessity of giving his attention to the market, that he 
can produce for this aforesaid 35 cents and still make a much 
handsomer profit than his father, or his grandfather made who 
received 65 cents of the consumer's dollar in return for his 
product. And the more effective the producer becomes in his 
specialty, the less can he afford to spend his time in a field 
where he is not a specialist, — that of marketing, for Example, — 
and the greater is the amount of his product that he can eco- 
nomically jdevote to the support of the persons who take over 
the marketing function for him and for the consumer. 

The seemingly large profit of the middleman may be, there- 
fore,, merely a testimonial to the high productive efficiency of 
both producer and consumer, brought about by the extension 
of specialization in all fields of production made possible by 
the division of labor between farmer and middleman. Grant- 
ing that the function of the middleman is a necessary and pro- 
ductive one, what guarantee have we that the middlemen will 
be effective in the performance of their duties and will not take 
for themselves an unduly large share of society's product for 
the performance of this function ? 

Thus far we have depended upon competition both to select 
the most effective persons and to regulate the price which these 
shall receive for their services. Competition is essentially a 
selective process, and I am still of the opinion that there is no 



122 MARKETING AND FARM CREDITS 

other agency that is likelv to equal competition in the efficiency 
of the selections made to fill the rarious posts in modern in- 
dustry. It may be, and no doubt is, necessary to determine 
consciously and formally by law the plane of competition. It 
is very surprisiug that more classes of middlemen have not 
long since been recognized as public servants and regulated 
accordingly, for unregulated competition does not guarantee 
the standards of right and -wrong that are to be observed. To 
bring competition to the proper plane it may be necessary to 
prohibit many practices at present indulged in by middlemen, 
but no other selective process is likely to succeed as well as the 
basis for selection. 

Monopoly and Middlemen 

Again, if monopoly has crept in, we have of course no guar- 
antee that the middlemen shall be either effective in the per- 
formance of their function or reasonable in their demands, 
and formal organization may be the only alternative. This 
question of monopoly must be carefully sheared apart from 
the question of the middleman's function. Much of the objec- 
tion to the middleman is grounded in the fact that he is com- 
monly supposed to get monopoly profits. This is a question 
quite apart from that of his function, and therefore outside the 
field of this discussion. 

Confusion as to What Are Profits 

Much confusion and misunderstanding has resulted from the 
use of the term profits, and in a failure to discriminate be- 
tween that part of the middleman's return which is really, 
profit and that which consists of wages or salaries, rent and 
interest. Professor Carver said recently that it seems to re- 
quire a surgical operation to get this distinction into the heads 
of some people. Wages and salaries, both of the middle- 
man's employes and of himself,' rent and capital charges are 
inevitable expenses no matter what sj'stem of distribution is 
employed. The middleman's profits proper as distinguished 
from these are his remuneration of the risk involved. Much 
of this in likewise inevitable. Competition naturally draws 
into this field those who do not shrink from taking risks as 
much as most of us, and if competition prevails this risk is 
very probably borne for less than the amount that most pro- 
ducers and consumers would demand for the same sacrifice. 



W. G. SCHOLTZ 123 

The profits may, therefore, be lower than those that would be 
demanded by cooperative organizations who should render the 
same services and assume the same risks. For most of these 
costs can be dispensed with only by decreasing the quantity or 
lowering the quality of the services rendered. 

I have the fullest, sympathy with the desire to reduce the 
cost of every productive process through the removal of waste 
and inefficiency and through the devising of new methods. 
The productive process at present intrusted to the middleman 
deserves careful study to the end improving it. But, we must 
constantly keep in mind the possibility at least that the middle- 
man is performing a necessary on indispensable function more 
cheaply and adequately than it would be performed by con- 
scious and formal cooperation. 

The public mind is infested by an unusual number of agree- 
able fallacies. If these are to be eradicated, someone must 
state some disagreeable truths. 



WHY A STATE DEPARTMENT OF MARKETS? 

W. G. SCHOLTZ 
State Director Idaho Office of Markets 

I have been asked to tell why the Idaho legislature created a 
special state department to assist farmers in their commercdal 
problems, the scope of the law, what the department is endeav- 
oring to accomplish, and if possible draw some general conclu- 
sions of value to other states. 

The idea of securing the establishment of such a state depart- 
ment first came into my mind a half-dozen years ago while try- 
ing to work out my salvation on a sagebrush ranch on one of the 
irrigation projects of Southern Idaho. At every turn obstacles 
were encountered which I afterwards saw could have been 
avoided, had dependable information and advice been furnished, 
from a source in which the settler could place confidence. From 
this experience in the development of a farm home under most 
unfortunate circumstances, and my failures and successes in mar- 
keting farm produce both by the crate and the carload, was 
drafted the bill through which the last session of the legislature 
created the office of director of farm markets; and then the gov- 



124 MARKETING AND FARM CREDITS 

ernor invited the author of the law to undertake 'the task of or- 
ganizing the department, in response to the solicitation of the 
farmers' organizations over the state. This undivided support 
of the producers over the state, right from the start, has been a 
great factor in enabling me produce such results as have already 
been secured. 

There are 3 distinct divisions in the law under which this 
department operates. In the first place there is the free state 
employment bureau, through which farmers desiring help, or 
farm laborers desiring work, are brought together without ex- 
pense to either party. This part of the work has already tuU}^ 
proven its worth in the few months it has been in operation, 
filling a need that cannot be supplied properly in our territory 
at least by the federal department of labor or any other mediiun. 

Putting People on the Land 

The second division in the department's work is a feature that 
really might be included in the duties of the immigration com- 
missioner in most states, but Idaho has no such official at this 
time. The duties under this di^^sion include the investigation 
of literature pertaining to colonization or settlement sent out of 
the state by promoters, real estate dealers, or others, and the 
warning of homeseekers against inaccurate or misleading state- 
ments, as well as the prosecution of wrong-doers when evidence 
shows that a homeseeker has been taken advantage of in any way. 

The state of Idaho, like the other states in the West, is suffer- 
ing at this time from the unf ortmiate promotion of a few yeai*s 
ago when many of the wrong t^^e of people were brought onto 
the land, settlers who were either unfitted for farming, or who 
through misrepresentation of conditions came onto the land with 
insutficient funds. This department is attempting to prevent 
the placing of any more misfits into the farming communities 
of the state, or the securing of immigration under any misrepre- 
sentation whatsoever. "We are working on the theory that the 
truth is good enough, and will, in the end, bring more settlers 
of the right type, if the homeseeker can only be satisfied that he 
is being given a true statement of conditions, without any exag- 
geration. 

An important feature in connection "s^-ith this division of the 
department's activity is the recei^'ing direct from OAvners de- 
scriptions of farm property for sale, and the maintaining of a 
properly classified list of such properties for the inspection of 



W. G. SCHOLTZ 125 

prospective buyers. Through the operation of this land listing 
feature, the department is enabled to put prospective settlers 
directly in touch with the owners of many attractive holdings 
in all parts of the state which can often be purchased at figl^res 
that remove the incentive for going into undeveloped sections 
and tabing up raw land. Before placing the homeseeker in di- 
rect communication with these properties, however, we ascertain 
the present occupation of our correspondent, whether or not he 
has had any previous farming experience and if so how much 
and where, his preferences in the way of climatic conditions, 
acreage, type of farming, etc., also the number of children in Ms 
family and the age of each;, on account of the school and farm 
labor problem. "With these and other facts before us we are en- 
abled to put our correspondent in touch with such places as we 
feel ^vill make of him a contented and prosperous permanent set- 
tler (in case he decides to locate within our borders. This is the 
one most essential element in iimnigration and state develop- 
ment that has been overlooked too much in all parts of the 
■country in the past — this human element — the character of the 
purchaser of land, taking interest in his future welfare as well 
as in his immediate investment. 

Helping the Farmer Sell His Produce 

The third and principal division of the Idaho farm markets 
law is the one concerning the better distribution of farm prod- 
ucts. This part of the work is, of course, the slowest to get 
fully under way, there being a great deal of preliminary work, 
organizing, surveying the field and mapping out of plans neces- 
sary before this feature of the law can be gotten into full opera- 
tion. Enough has already been accomplished along this line, 
however, to show the enormous possibilities for the future. 

The possibilities for usefulness of such a state department as 
this, both to producers and consumers, are simply immeasurable, 
and for this very reason my greatest temptation in this work is 
to attempt too much ; to spread my efforts so thinly over such a 
large number of projects that none of them will be properly 
covered. This danger will also probably be encountered in the 
development of market bureaus in other states, as in no section 
of America has consideration been given to distribution in pro- 
portion to production, the problems of marketing and rural or- 
ganization consequently having piled up to such an extent that 
when a department for their solution is established the office is 



126 MARKETING AND FARM CREDITS 

deluged with a mass of problems all demanding solution at the 
same time. The avoiding of friction at this stage will require 
both diplomacy and good judgment in the selection of the lines 
of work first undertaken. 

Farmers Lack Self-Confidence 

One of the greatest handicaps to overcome is the fact that most 
farming comnumities lack confidence in their own ability to suc- 
ceed cooperatively in the marketing of their crops. They will 
work together in churches, social organizations, highway dis- 
tricts, etc., which shows that the cooperative spirit exists at least 
to some extent in most communities, but has not been fully de- 
veloped. One of the greatest opportundties for a state depart- 
ment of farm markets is the development of this confidence. 
How ? Through showing the farmers in each district what farm- 
el's in other sections of the country, similarly situated, have ac- 
complished. You can go into 9 out of 10 farming communities^ 
in almost any state, and present the most plausible theories and 
workable plans Avithout arousing sufficient confidence to get any 
sort of commercial organization started ; but go into those same 
communities, with the same plans exactly, pointing out to them 
some certain organization of fanners that is successfully operat- 
ing the plan and you will arouse their enthusiasm immediately. 

What the average farming community wants is concrete evi- 
dence of the possibilities and success of cooperative marketing. 
Here is one of the many opportunities presented to a state mar- 
ket bureau. "With a man at the head of the bureau who is con- 
versant with the various cooperative movements over the coun- 
try, concrete examples of successful organizations can be found 
that will be adaptable to the community needs of almost any 
marketing situation in any state. With the example of success 
placed before your district your task is half accomplished. The 
next thing is to discover or develop a leader to apply the plan. 
Very little can be done without leadership, and this leadership 
must almost invariably be developed among the farmers them- 
selves. 

On account of the fact that the director of farm markets in 
Idaho has to attend to many of the duties of a state immigration 
commissioner and a state commissioner of agriculture, besides 
helping the farmers solve their marketing problems, it has been 
impossible for me to consider the personal problems of the indi- 
vidual farmer to any great extent. If this individual work 



W. G. SCHOLTZ ' 127 

could be provided for through a svifficient operating appropria- 
tion and the necessary additional help, it ought to by all means 
be taken up. But with a maximum number of duties and a 
minimum appropriation it is necessary to confine the work 
largely to community and state-wide problems, working along 
broad and fundamental lines, leaving the individual work for 
later consideration. 

As examples of what I mean by working along broad lines, 
and at the same time avoiding mere glittering generalties, let 
me mention some of the work undertaken in Idaho. 

Realizing the natural advantages of Idaho for dairying over 
most of the present leading dairy districts of the country and 
the consequent future possibilities of the industry, seeing the 
chaotic conditions existing at the time in most of the creameries 
and cheese factories of the state, the lack of uniformity of prod- 
uct, disorganized and wasteful methods of marketing the prod- 
uct, etc., I have organized a butter and cheese scoring organiza- 
tion, through which every factory in the state has an oppor- 
tunity to knpw monthly how their product compares with that 
on the market, and through the counsel of the judges they are 
shown how to overcome any faults. With a standardized, higher 
quality product a better market is assured; but in addition to 
this movement to imj)rove quality, the cooperative factories 
have been brought together into an organization through which 
supplies are bought together, markets being developed cooper- 
atively, uniform methods of accounting being installed, such of 
the product as goes direct to the retail trade being sent out un- 
der the same brand for all the creameries, etc. Through this 
organization it is hoped to develop and put the dairy industry 
of the state on a firmer foundation. In addition to this work 
in helping the factories already in operation, I have persistently 
kept on the trail of the unscrupulous creamery promoters who 
have been operating throughout the state, to prevent them from 
unloading on the farmers plants worth $2,500 for 5 to 6 thous- 
and dollars. The department has counseled with the farmers 
in dairy communities, helping them organize without the pro- 
moter, get better arranged and better equipped plants and for 
half the cost ! 

Crop and Market Reporting Service 

The crop and market reporting service instituted by the Farm 
Markets Department in Idaho is another instance of general 
rather than individual help. For example, let us take the po- 



128 MARKETING AND FARM CREDITS 

tato oivp. At potato digging time this fall it was found that the 
large speculative buyei*? who in yeai*s past have been getting the 
bulk of the state's potato tonnage at their own tigiires weiv pay- 
ing only 45 to 50 cents per hundi*ed on the ground that the gov- 
ernment crop ivports showed that there wjts a big over-pwdue- 
tion of potatoes thivughout the United States this year, that even 
Idaho had a far big^r crop this year than last and that not 
over 50 cents per hundred could be expected this year. I saw 
that the growers over our state were being made the victims of 
a government potato civp reportiug sA'stem that was worse than 
worthless, in that the early and late potato crops weiv lumped 
together in their statistics, and that while the southern crop of 
early pot<itoes had been large the northern crop of late jH^tatttes. 
on the other hand, was way below last year — and the only pota- 
toes affecting the Idaho crop, the early potatoes long since hav- 
ing been consumed — I iunuediately advised the growers over the 
state, through the press and through circulars distributed 
throughout the potato growing districts under no circumstances 
to sell at present prices, not to be misled by the government crop 
Imports. The growers were told that the tonnage would be less 
than last year, that my advices even from Idaho showed at least 
30 per cent less tonnage than the government buivau of statistics 
was crediting our state with, that potatoes were worth at least 
SO cents per hundred at the time, and not to sell until they could 
get that price. 

How Idaho Made Money on Potato Crop 

The growei-s expivssed contldeuce in my estimates and took the 
department's advice as against the government tigures which 
played right into the hands of the speculators and which these in- 
terests were using to such good advantage. Kesnlts: within 2 
weeks from the time the true ci*op situation was placed before our 
growei"S tlie buyers were offering the growers 20 to 30 cents moi"e 
for their potatoes than they had just 2 weeks previous told 
them they could expect for the season. And the price is still go- 
ing up. getting closer to the dollar mark every day. "What we 
have been able to save the growers on this one deal alone, it is im- 
possible to say ; but the saving has amounted to nuuiy thousands 
of dollars. Let me say at this j)oiwt that we in Idaho charge the 
federal bnivau of statistics with j>laying into the hands of the 
speculators. It is not for me to Siiy whether it is fraud or simply 
almost unbelievable arross isrnorance — the effect on the grower is 



J. W. STROUD 129 

the same. I advised two years ago that the bureau of statistics 
could be transferred to Mr. Brand 's department where it belongs. 
What is true of our market reports on potatoes is true of other 
crops as well — and the work has hardly begun. But the possibili- 
ties for help in the dissemination of honest crop and market in- 
formation are simply enormous — and what is being accomplished 
in Idaho can be duplicated in any other state. 

If I had the time I would like to discuss with you the many thou- 
sands of dollars saved to producers and consumers through our 
])ublic market work, how the work was started and what our plans 
are for the future along this line. The farther the work pro- 
gresses the bigger the opportunities develop. The state assistance 
in marketing idea has come to stay, and I am confident that with- 
in a very short time most of the states in the Union will be con- 
ducting such departments. 

I have been devoting much time during the past year to corre- 
sponding with governors of other states, as well as commissioners 
of agriculture trying to mold sentiment in favor of such state 
marketing assistants in other states. At this point I might state 
a fact which possibly some of you don't know — 13 states already 
have marketing bureaus ; in fact only yesterday we organized a 
national association of state marketing officials, from which you 
will probably liear more before the close of this conference. 



PERISHABLE PRODUCTS AND ASSOCIA- 
TIONAL SELLING 

J. W. Stroud 
Secretary, Ozark Fruit Growers' Association, Rogers, Arkansas 

I am to talk to you on the subject of cooperation and the 
system as adopted by the Ozark Fruit Growers' Association of 
Southwest Missouri and Northwest Arkansas in marketing 
highly perishable products. 

In order that you may better understand our system, I wish 
to state that for several years our growers were shipping 
strawberries in a small way, by local express, but the industry 
soon outgrew the demands and it became necessary to hunt 
more distant markets and carlot shipments were resorted to, 
which called into service the refrigerator car, and at this time 

9— M. p. c. 



130 MARKETING AND FARM CREDITS 

growers, not being able to load oars independently, M-ere 
brought into organizations. 

These local organizations soon discovered that they were 
competing against each other and the results were disastrous. 
It was almost impossible to make cash track sales ; also the in- 
dustry being in its infancy, there was no satisfactory system 
of grading, inspection or packing. 

About 12 years ago some of our best growers, seeing the 
needs of a better system of marketing, got together after hold- 
ing several preliminary meetings and arranged what is now 
known as The Ozark Fruit Growers' Association. This is a 
marketing agenc.y, incorporated under the laws of IMissouri, 
making first shipments in 11)04, and doing a successful and sat- 
isfactory business since that date. 

Essentials for Successful Agency 

In order for a marketing agency to be successful there must 
be first, the unit from which to build, -w-ihieh is the local asso- 
ciation. 

In our first year's experience Ave found it very hard to break 
away from the old, haphazard way of marketing, that of con- 
signments. Results were some better, however, than were re- 
ceived the year previous, which were about 75 cents per crate, 
for strawberries. While under cooperation an average of $1.10 
was made, and since that time we have improved on our pack- 
ing system and inspection and by fair dealing with our trade, 
we have established a confidence that has enabled us to make 
almost exclusive cash track f. o.b. sales, and selling as high 
as $2.75 to $3 per crate. 

This association stands for a uniform pack and a uniform or 
standard package. We have established a system of grading 
our strawberries, which is known as the "field shed pack." 
Under this system of packing and grading each crate is almost 
as perfect and uniform as is possible to pack it. We have also 
now the uniform package or container, knoAAai to the trade as 
the "American ventilated crate" — standard dry measure, 24 
quarts to the crate. 

In our first year's work we only had 30 associations affiliated 
with us in this system of marketing, but today we have almost 
85 local associations who are loyal to our system and who are 
stockholders. Our membership numbers almost 5,000, includ- 
ing individual stockholders. In this number is included the 



J. W. STROUD 131 

best fruit growers of the Ozark section of the country, as well 
as the largest peach orchard in the United States, the Arkansas 
Orchard Planting Company. Coming up from a few hundred 
car shipments the first year, we marketed this season in round 
numbers about 1,900 cars of highly perishable fruit and pro- 
duce for our members, paying to our growers in round num- 
bers about $700,000. 

Representation in the Markets 

One of the secrets of our success is brought about by placing 
the best and most efficient representatives we can secure in the 
best markets of the country, whose duty it is to make sales, col- 
lections, and look after the interests of the association in ad- 
justing any differences that may arise between the grower and 
the dealer, also to keep our main office fully advised daily of 
the market conditions. 

It is also our duty as a marketing agency to adjust any dif- 
ferences in the way of claims against transportation lines for 
our members. 

Our association is organized purely on a cooperative basis 
and not for the purpose of profit taking or declaring a divi- 
dend. We market the strawberries and blackberries on a 3 
per cent commission basis. Peaches, apples, cantelopes, etc., 
are sold on a 5 per cent commission basis. Out of this fund 
are paid all the running expenses of the association, including 
the representatives, office 'force, general sales manager, tele- 
graph and telephone service. 

Now, the question might be asked, what are some of the 
benefits to be derived by cooperation. I will name a few : 

1. It enables the small growers to ship in carlots. 

2. It distributes the crop so as to prevent gluts in the mar- 
ket. 

3. It enables the growers to establish a brand that will be 
known and sought in the markets, thus insuring better prices. 

4. It makes possible better business methods in dealing with 
the fruit buyers, transportation companies, etc. 

5. It provides better equipment for handling the crop. . • 

6. It insures better care of the orchards. ' 3 

Avoiding the Glutted Markets 

A benefit of cooperation that is most generally urged and is 
especially important Avith perishable fruit is proper distribu- 
tion of crops to prevent glutted markets. While the commis- 



132 MARKETING AND FARM CREDITS 

sion men have a personal contact with the market and are in 
a position to place a given amount of the product at any point, 
to a good advantage they are not in a position to limit the 
amount that will be put upon the market and prevent gluts. 
The commission men themselves generally admit this. 

Unless your fruit passes through one channel, which has all 
information in regard to shipments, amounts going into different 
markets, and the conditions of these markets, you will never 
achieve success. As long as a number of different organizations 
are in the field working independently, you will always be work- 
ing at cross purposes and the results are sure to be disastrous. 
Your owTi competition will kill the price of your products and this 
is entirely to your own disadvantage with no corresponding ad- 
vantage to the people who buy and handle your products, as, 
owing to this competition there is always uncertainty with re- 
gard to cost of goods delivered, and each dealer is afraid that his 
competitor will be able to get the same goods for less money. 

He is, therefore, un^villing to take hold and push the business 
as it should be pushed ; and by this independent system, or lack 
of system, you would fail to hold your market to a cash track 
proposition. The result would be consignments, which means 
disappointments, heavy losses, and disastrous results. 

Cooperation further enables growers to make use of better 
business methods. It enables them to meet on equal terms, the 
men with whom they deal. Many people think that they lose 
their independence by joining an association, or marketing 
agency, of this kind, when it really is the only means of making 
them independent. The dealer is generally equipped with bet- 
ter knowledge of the market ; and he controls a larger business. 
This makes him relatively independent of any particular ship- 
per, unless the shipper is a very large one. For the grower to 
meet the buyer on equal terms he must know the condition of the 
market as well as the buyer knows it, and must control a busi- 
ness large enough to attract the interest of a large proportion of 
the trade. 

Accurate first-hand knowledge of the condition of the market 
can be secured only by having efficient representatives in the 
market. Large growers often have representatives in one or 
two of the largest markets, but it would generally have to be a 
very large grower who could afford representatives in enough 
of the markets to make him equally independent. An associa- 
tion, especially a large one, can have such representation in all 



J. W. STROUD 133 

the markets reached by the crop, and the greater the association, 
the more market information can be afforded and the cheaper 
it comes to each grower. 

Thus, under cooperation the association can have a manager 
who thoroughly understands the markets in a general way. If 
it be perishable fruit, that is handled, the association can have 
men at all the important market centers the goods are to reach. 
Then, with all the growers and a good uniform pack behind him, 
he controls a business that demands respect and he should gen- 
erally be able to set the price. 

This is a day of cooperation. The very air itself is filled with 
the spirit of cooperation. Our banking institutions have their 
organizations, the largest business interests of our country have 
their organizations. Take the International Apple Shippers' 
Association ; the Western Fruit Jobbers ' Association, and the Na- 
tional League of Commission Merchants of the United States, 
all organized for their protection and benefit — so, why should 
not the farmer organize for his own protection? 

But, the average farmer of this country, is the hardest person 
to organize. He is the one who should be the first to organize 
and work through cooperation but is the last to see his own in- 
terest. As a class we are afraid of each other. Just let a far- 
mer, if you please, enter into a transaction or sell something 
from the farm and make a few dollars. All of his neighbors will 
know it before night. But let him meet with a loss and you 
never hear of it at all. 

Cooperation Endorsed by Town Business 

In the Ozark country where we operate, this system of cooper- 
ation is endorsed by our banks, our business men, our commer- 
cial clubs, and transportation companies. 

One of the aims of our association is to build up a business 
system which will be constantly reaching out and extending its 
means of distribution, thereby reaching many fields never en- 
tered before, directly, at prices which will greatly increase con- 
suniption, at a cost that will leave a good return to the growers. 

Until a few years ago there had never been a carload of straw- 
berries shiped into the Northwest direct from the growers until 
the Ozark Fruit Groovers' Association sent one of their represen- 
tatives into that section and began to work the trade, and to ex- 
pand the distribution of the products of the growers of the 
Ozark section. This could not have been done by a local unit or 



134 MARKETING AND FARM CREDITS 

association as the expense would have been too great, but when 
borne by all, it was handled to good advantage. 

I am glad to state and to know that the spirit of cooperation is 
growing, and there is no doubt in my mind if all the fruit grow- 
ers of our country were organized and working together in har- 
mony through the proper channels that they would soon be the 
most prosperous class of people on the earth. 

We should cooperate to the fullest extent. I believe that the 
time will come and it should be soon, now, when all the most up- 
to-date growers will come into cooperation. A central sell- 
ing agency could be organized on a cooperative plan by enrolling 
under one management all organizations of the country shipping 
the same product at the same time : if peaches, all the peach 
growing districts ; if strawberries, then all the berry growers of 
the eountrj^ This central agency can obtain and give the asso- 
ciations daily information as to prices, number of cars shipped 
daily, number sold, number consigned, where the best demand is, 
what markets take most freely and any other information lead- 
ing to the protection of the markets as well as the growers. 

Successful and intelligent distribution is the key to success 
for the grower of highly perishable products. It is one thing 
to grow the fruit, and it is quite another thing to sell it. 

In sections of the country where a close, compact, cooperative 
association is organized and in working order, you will find an 
advance in land values, better homes, better financial conditions, 
and more interest taken in the care of the orchards and berry 
fields as a general rule. , 



R. E. HANLEY 135 



GREATER COOPERATION AMONG FRUIT 
GROWERS* 

K-, E. Hanley 
Secretary-Treasurer, North American Fruit Exchange 

Unquestionably the greatest economic problem confronting 
fruit growing communities is that of marketing — upon the 
successful solution of which all other branches of the industry 
are entirely dependent. Experience has proven cooperation an 
absolute essential to success in meeting the marketing problem, 
whether that be confined to localities, to districts, within state 
lines or nationally. 

Local organization of fruit shipping interests is, of course, 
the initial step forward in the direction of that cooperative ef- 
fort having for its purpose the securing of greater net returns 
for products of the farm and orchard. 

To achieve much along the lines of that purpose it is very 
necessary that the local shipping association shall be composed 
of a majority, if not all, of the growers of the community in 
which it exists. Further and probably quite as important this 
local combination of interests must possess the unfailing and 
loyal support of its membership. 

Cooperative effort alone cannot be relied upon to secure for 
the association member that return for his products which shall 
be commensurate with his land investment, cost of material, of 
labor and his individual energy ; for that he is much dependent 
upon the efficient, business-like and economical management of 
the shipping association with which he is affiliated. 

In many instances the individual grower-member accepts too 
lightly his share of the duty of securing to his organization 
that character of direction and conduct of the affairs of the 
association necessary to successful operation. The result is 
that frequently the principles of cooperation are jeopardized 
and in instances have received serious setbacks through inca- 
pable or discreditable management. 

Some of the failures recorded among cooperative organiza- 
tions variously located can be attributed to the shortcomings of 



♦Delivered before the second National Conference on Marketing 
and Farm Credits at Chicago, in April, 1914, in joint program with 
the Western Economic Society. 



loG MARKETING AND FARM CREDITS 

iiureliable employes earrying responsibility (often underpaid), 
and improper exploitation of these growers' associations by 
seltish interests among the officials in charge. Too often are 
the official positions of snch associations striven for, as are some 
political plums of the public employ, by men more concerned 
with their desire for selfish gain than for the furtherance of the 
welfare of their constituent growers. 

However, experience has shown this practice to be greatly re- 
duced by increased supervision of iutlividual members and by 
the elimination of salaries of all officers not devoting their ser- 
vices exclusively to their association. This has had the effect 
of attracting to those elective offices only men with upright un- 
seltish motives, who are more devoted to the interests of their 
neighbonng growere collectively than to individual gains. 

Essentials of Successful Fruit Growers' Association 

Some of the important requirements and functions of the suc- 
cessful cooperative fruit growers' organization include: 

1. The absolute contidence and loyalty of its membership. 

2. The control in its district of all or a good majority of the 
products produced and handled by it. 

3. Its capitalization on a basis not requiring it to incur un- 
necessary indebtedness, and to become established as to credit 
so as to be able to secure loan accommodations, should that be 
necessary, without the expense of exorbitant interest charges. 

4. The ability to procure for its own needs and those of its 
membership, supplies, packing material, implements, fertilizer, 
seed, nursery stock, etc., at low costs, quality considered, 
through purchases by contract and otherwise in large (juantities. 

5. The maintenance of suitable and adequate facilities for the 
grading and packing of products of the membership along im- 
proved and economic lines. 

6. Through rigid inspection and careful packing, together 
with the use of advertising judiciously, the establishment of a 
reputation for high quality for its products thus creating a dis- 
tinctive demand for its trade-marked brands among the whole- 
sale, retail, and consuming trade of the country. 

7. Very necessary also is a reasonable control over the har- 
vesting of its growers' products so as to be able to regulate, as 
near as possible, distribution with a view of conforming to sup- 
ply and demand within the markets. 

When so much has been achieved by the local association it 
is confronted with the necessity of selling its output at profit- 



R. E. HANLEY 137 

able prices — that function most important of all — turning into 
cash the results of great care, hard toil, and considerable ex- 
pense. It is at this point that many cooperative growers' or- 
ganizations, though they may closely follow the ideal in sev- 
eral respects, widely diverge as to marketing methods. 

How Selling Plans May Differ 

A review of some of the methods in vogue in various pro- 
ducing districts of the country should interest. Among them 
we find : 

1. The consignment plan whereby goods are consigned with- 
out control direct to commission merchants with rebates on 
the receiver's commission that tend to maintain the shipping 
association. With limited tonnage and selections of thor- 
oughly dependable agencies this plan has some advantages. 

2. Contract distribution by commission merchants who un- 
dertake disposal of entire crops, but who, because of reciprocal 
obligations among commission merchants of other markets, 
must necessarily reconsign at additional commissions, rather 
than effect outright sale to these dealers of a large portion of 
the products handled. 

3. The direct marketing by the association managers by 
means of telegraphic and telephonic communication with car- 
lot buyers — a system conducted with some degree of success 
where the tonnage is limited and adjacent to important con- 
suming centers. 

4. The employment of resident brokers among the markets 
open to the association, these agents being generally satisfac- 
tory where not dependent for a livelihood upon the good will 
of the trade and disposed sometimes to favor unscrupulous 
buyers at the expense of the shipping account. 

5. The temporary employment for short time periods of local 
men selected from among the fruit growing communities and 
dispatched to the marketing centers to conduct carlot sales to 
wholesale dealers. It must be obvious that generally these 
men, lacking trained salesmanship, experience, knowledge of 
local trade conditions and familiarity with "tricks of the 
trade" are, and of necessity must be, at considerable disad- 
vantage in their selling operations. 

6. The state-wide exchange plan contemplates concentration 
of selling efforts on the part of allied shipping organizations 
within the state through a central exchange or clearing house, 



138 MARKETING AND FARM CREDITS 

thus by a combined tonnage securing the benefits of economy 
of operation, equitable distribution and the lessening of much 
wasteful competition. 

How the Exchange Plan Works in Citrus Industry 

Of thpse methods enumerated the exchange plan must ap- 
pear as that having the most advantages. We have but to 
look about to determine the effectiveness of such combinations 
of fruit growing interests. 

Let us first refer to California where exists the commonly 
^.ccepted ideal growers ' marketing organization, the California 
Fruit Growers' Exchange, with headquarters at Los Angeles. 
The California Fruit Growers' Exchange is a cooperative body 
^f approximately 6,000 fruit growers distributed among 117 
local associations within the state. 

Through its strength of number and consequent tonnage 
shipped over a period of 10 months in a year this federation 
of growers is enabled to, and does maintain offices of its own 
in the principal marketing centers. This established selling 
force largely facilitates equitable distribution among the mar- 
kets and excepting a small percentage handled through auc- 
tion in a few of the largest cities, the fruit of the growers, 
members of the exchange, is disposed of through outright sale 
in carlots to local wholesalers, prices being governed practi- 
cally by supply and demand. 

The exchange is a formation of 17 district or sub-exchanges 
■^comprising 117 local associations within the state, all operated 
on a non-profit cooperative basis and shipping collectively in 
a normal season about 20,000 carloads of fruit. 

It should be noted that the success of this organization is 
largely attributable to the thoroughness of this exchange's 
•selling organization and to the binding contract existing be- 
tween the association and its members, there being little oppor- 
tunity for digression on the part of the growers, a harmful 
practice so common to members of cooperative bodies in some 
states. 

Florida Follows California Method 

Li Florida may be found a somewhat similar organization of 
citrus fruit growers comprising 9 exchanges attached to which 
are about 60 local associations, but with less than 20 per cent 
of the state's crop under control. With this limited tonnage, 



R. E. HANLEY I39 

moving as it does within a short period of the year, the Florida 
exchange is only warranted in operating but a few sales of- 
fices of its own, using principally for an outlet for the grow- 
ers' fruit the auctions of a few of the larger markets. 

Reverting to California we may note the success of fruit 
marketing interests in the operation of the California Fruit 
Distributors composed of 14 incorporated shipping organiza- 
tions operating 100 or more packing houses in the shipping and 
marketing of about 6,000 cars of deciduous fruits annually. 

Selling Northwestern Apples 

Extending our observations into the northwestern apple 
country we find that territory quite as progressive in the mat- 
ter of cooperative organization of fruit interests as in the effort 
to lead the country in the production of fine apples. In fact, 
control of 80 per cent of a normal season's crop of 12,000 car- 
loads of boxed apples there being divided between the North- 
west Fruit Exchange of Portland, Ore., with several subdivi- 
sions comprising numerous local units within the states of Ore- 
gon, Washington and Idaho, and the newly organized North 
Pacific Fruit Distributors, a coalition of shipping associations 
and individual shipping companies heretofore competing wtih 
one another. 

These references to a few of the larger organized shipping 
interests, most all of which have long since passed the experi- 
mental state are now accepted as substantial and successful in- 
stitutions, must be sufficient to indicate the success of coopera- 
tive effort along broad, extensive lines. 

While considerable organization exists, combination among 
fruit producing factors has not kept pace in that respect with 
other lines of industry. Yet much good progress is being lately 
made, thanks to greater assistance from state and federal depatr- 
ments devoted to agricultural pursuits. 

As regards modes of marketing we find to date but one sin- 
gle cooperative organization (The Exchange of California) suf- 
ficient in strength and tonnage to warrant the maintenance of 
its own selling machinery on a comprehensive scale — a trained 
and experienced sales force quite as essential to the effective 
selling operations of the important fruit shipping associations 
.as the large commercial establishment. 

Excepting the citrus fruit territory of California no fruit 
producing section extends its shipping period beyond a very 



140 MARKETING AND FARM CREDITS 

foAv months of the yoai*. eoiisequoutly the ostablishmeut of any 
extensive sales force among the marketing oentei"s by the in- 
lUvidual eooperative association or exclianire is ahviously im- 
practical. 

Attempt to Orgfaime Nation- Wide Selling Agency 

It ^vas in recognition of tliis fact, and the great need by 
fniit shipping interests of marketing facilities better than those 
then available that measures -were undertaken in 1910 to cre- 
ate a central, country-wide selling agency with a corps of 
trained salesmen located in all the important consuming cen- 
ters. This force was to be used jointly by non-competitive 
cooperative associations and exchanges of good standing that 
would ship theii" products in consecutive season periods 
throughout the year. 

This concentration of selling etYort by important shipping- 
factors variously located from Florida to Oregon made possible 
the year round operation of a thoroughly organized selling 
force under the expense to the individual association only as 
actiu\lly used. 

This plan contemplated the operation of tlie forces at the 
marketing end under the direction of the individual associa- 
tion manager dnring his respective shipping season in the ex- 
ictitiou of sales ordei-s and acquiring authentic information of 
markets to facilitate cash selling and distribution. 

Tt Avas thus the North American Fruit Exchange, in reality 
an exchange of exchanges, was organized by horticultural in- 
terests of Florida. West A'irginia. New York and Oregon, and 
incorporated January, 1911. 

The exchange's board of directors included Messrs. K. IT, 
Parsons, president of the Rogue River Fruit .!c Produce Asso- 
ciation. IMedford. Ore.; W. F. Gwin, general manager of tlu* 
Northwestern Fruit Excihauge, Portland. Ore.; William Camp- 
bell, secretary and manager of the Virginias' Fruit Exchange, 
Oharlestown, West Virginia : Lloyd S. Tenny of Hilton. New 
Vork. general manager of the Florida Citrus League ; and E. 
P. Porcher. manager of the India River and liake Worth Fruit 
Association. Cocoa, Florida. 

This central sales organization operates district otVices in all 
important markets aiul from its general ot^ces at New York and 
Chicago constantly supervises the activities of this force which 
is under directions of the affiliated shipping associations. 



WILFRID WHEELER 141 



MARKETING MILK IN NEW ENGLAND 

WlIiKUII) WlIEKIiKK 
Secretary, Massachusetts State Board of Agriculture 

The marketing- of milk in New England is practically a Bos- 
ton (luestion, as over 80 per cent of the milk shipped by rail is 
either consumed in Boston or distributed through it, therefore 
in analyzing this subject we shall have to keep in mind that 
Boston is the center of the industry. 

The history of the Boston milk supply is somewhat similar 
to that of many of our large eastern cities and a brief resume 
of it is necessary in order to appreciate present day conditions. 

Less than 50 years ago Boston milk was produced within 30 
miles of the state house, and in fact some of it was produced 
within the present metropolitan district. Building operations 
and high land values, however, soon drove the milk farmers 
into new territory, and farms near the cities were reduced in 
size and began to produce products of higher value, such as 
vegetables and fruit, depending on the city stables for manure. 
But better transportation facilities by bringing in milk pro- 
duced at even greater distances, tended to keep pushing the 
dairy farmer further ;and further away, as the more distant 
producers on cheaper land and on soil in many instances bet- 
ter adapted to dairying and with cheaper labor were able to 
undersell the milk farmers nearer the city. These changes 
have been going on for years so that now Boston draws its 
milk supply from 7 states and a part of Southern Canada. 
In other words, outof 7,600 dairies supplying milk to Boston, 
only 1,300 are in Massachusetts, and the bulk of Boston's milk 
supply is coming from distances varying from 150-200 miles, 
and some of it from as -far as 280 miles away. What is true of 
Boston, however, is not so true of other cities in New England, 
for they are generally more accessible to the small (producer 
who can readily market his milk directly thus avoiding many 
of the complications which marketing milk in a large city 
creates. The same processes, however, which affected Bos- 
ton's supply are gradually affecting these other cities and it 
will not be long before they too will be drawing their supply from 
long distances. 



142 MARKETING AND FARM CREDITS 

Geographically ]\Iassacliusetts is at a great disadvantage, as 
far as milk production is concerned. She is surrounded by 
large producing states whose products are freely accessible to her 
markets and whose soil conditions in many cases are far better 
adapted to dairying than her own, and added to this, Massa- 
chusetts has helped the destruction of her dair\' industry 
by saddling herself with a milk transportation law which atfects 
only her own dairymen. To complicate raattei*s still further, 
there periodically appears a batch of would-be legislators who in 
their own minds have settled this much-vexed milk question, and 
who from looking at the question from only one angle attempt to 
make laws absolutely impossible of enforcement, or else designed 
to bear down heavily on the IMassachusetts producer and without 
any prospect of increased financial return to pay for fads. 

Viewed as a whole. New England conditions have changed 
greatly in the past 25 or 30 yeai*s. Prior to the opening of the 
Boston market to the whole milk business there w^ere many cream- 
eries in New England, the total number being about 375. which' 
shipped their entire products as either butter or cheese. Western 
competition and better transportation facilities had their share in- 
reducing these to a small number, and where they were once inde- 
pendently owned they are now largely controlled by the great 
dairy companies. Like many other industries in our country, 
the creamery business in New England has come into the control 
of big business, and is now in the hands of 5 large companies, 
operating in separate territory and seldom crossing each other's 
lines. 

Production Still in Farmers' Hands 

At the present time, as in the past, the actual production of 
milk in New England is still in the farmers' hands. The small 
herd, ranging from 5 to 20 cows, is still the rule in New England. 
Dairying is not strictly a business by itself in New England, as 
the gi'eater part of our farmei*s combine some other activity with 
their dairies. ]\Iany farmers say that they keep their cows prin- 
cipally for the manure. ]\Iilk producing fanners might be- 
classed under 3 heads: 

1st: Those producing under contract for large dealer. 

2nd: Those producing near large towais or cities for smaller- 
dealers. 



WILFRID WHEELER 14^ 

3rd : Those producing independently for their own customers. 

The great milk producing states of the New England group are 
Maine, New Hampsliire, and Vermont. The character of the soil, 
climatic conditions and the general training of the farmers makes 
for natural dairying conditions. New York on the west, is also a 
large producing state and her conditions are much the same as 
those of the 3 states named. 

That our farmers are not keeping as many cows as formerly is 
apparent from the following figures of the decrease of cows in the 
New England states during the last 10 years. The number of 
cows assessed in Massachusetts in 1905 was 181,920; in 1914, 
147,209, showing a decrease in 10 years of 34,711 cows, or 19 per 
cent. The number of cows assessed in New Hampshire in 1905 was 
113,712; in 1914, 86,438, showing a decrease of 27,274, or 24 per 
cent ; those assessed in Maine in 1905, 165,216 ; in 1914, 130,661, 
showing a decrease of 34,555 cows, or 20 per cent. Yet on the 
whole, our farmers are coming to realize the necessity of keeping 
cows of greater productivity than in the past and while the 
figures show a decrease in actual numbers, yet the fact that many 
cow-testing associations are being formed proves that results 
rather than numbers are being looked for. All interested in the 
farmer 's welfare are advocating the elimination of the boarder . 
cow and this propaganda is having its effect. While certain lo- 
calities are declining in the industry, certain other localities are . 
going into the business rapidly, and in most instances where in- 
creases are noted, this is due to the effect of local cooperative 
creameries or to an increase in price guaranteed by the dealers. 
The introduction of more pure-bred herds and animals of a 
higher productive capacity is having a marked effect in some 
places, while in others cows are being put back on the farms to 
assist in the ever-decreasing soil fertility supply. 

Cost of Production 

The almost utter lack of any system of bookkeeping on our 
farms has made it almost impossible to tell what milk has cost 
to produce, but based on investigations made by the Massachusetts 
Board of Agriculture, in Massachusetts about 5 cents a quart is 
as close a figure as can be arrived at, while for New England, in 
the report of the Boston Chamber of Commerce investigation, in 
which some 2,500 farmers were examined, estimates largely opin- 
ions were given varying from about 21/0 to 4 cents. A peculiar 
part of this testimony was the fact that with the higher produc- 



144 MARKETING AND FARM CREDITS 

ilia: cow tlio oasts were tho heaviest. Sueh faetors as feed, labor 
and overhead oharg-es were eonsidered iu this analysis, due credit 
hoiuir jriven to e^lf and manure. One interestiuir featuiv was 
brought out by the investigation to the etTeet that farmei*s who 
were raisins: young stoek stated that theiv was no depreciation in 
herds. Avlnle the contrary was found where no young stock was 
raised. 

The use of luachinery in production, as milking machines, sep- 
arators, chiritiei-s. bottling machines, and the power for running 
them luis not made the great changes which bad been pivdicted, 
for while a large proportion of our farmers own and operate sep- 
arators, it dcx's not seem to have increased production materially, 
nor affected tlie costs. 

Discontent of Dairy Fanners 

FarnuM's have become dissatistied from numy causes, and un- 
less conditions can be nuiterially changed. New Kngland is bound 
to see a greater ivduction in her dairy interests. jMany have 
realized for a long time that there was no protit in the business, 
but as their farms are not adapted to otJier forms of agriculture, 
the problem that faces them is either to sell their fanus or stay on 
and run the chance of a better day. 

In order to get a fair idea of the processes throiigh which the 
milk of New England goes before it reaches the consumer's t<ible 
it will be necessary to understand the agencies through which the 
milk is handled. We have in New England several types of 
dealer, classitied by the Boston Chamber of Commerce report, as 
follows : 

1. Large dealers, handling 5 or more cars of milk a day; sup- 
ply coming from several states and the Province of Quebec. 
(Four such dealei*s iu Greater Boston.) 

2. Dealei*s handling 1 to 5 cars a day ; s\ipply coming from 
two states. (, Twelve in Gi*eater Boston.) 

3. Cream dealei"S. whose business is largely that of handling 
ci*eam. (Six in Boston.) 

•4. Ismail dealers operating from 1 to 10 retail wagons, getting 
their supply from large dealei*s or local producei-s. (Five hmi- 
di*ed or over in Greater Boston.) 

5. Producei*s who are putting out a special milk as certitied 
or nuxlical milk; only one per cent of the milk of Boston is of 
this kind. 



WILFRID WHEELER 145 

The large dealers who control about 80 per cent of the output 
have been able to build up their business largely by the sys- 
tem of leased cars on the railroads entering the territory in 
which they operate. (These leased cars are not allowed in 
IMkssachusetts. Seventy-five per cent of the milk coming to 
Boston is handled by the leased ear system.) 

Under this system the large dealers have practically allotted 
the territory among themselves and have the farmers more or 
less at their mercy. As these are the only milk cars run over 
the railroad, the farmer must sell to the dealer operating the car, 
and as there are many small branch railroads in New England 
over Avhich only one car is run and that by the dealer, the matter 
is still more complicated as the farmer is unable to secure com- 
petitive bids for his product. There are no open cars except 
in Massachusetts, but the leased car system works against Massa- 
chusetts in competition with the rest of New England, as the rate 
in the open car for a short distance is often greater than the 
leased car covering a longer distance. 

Dealers Control Many Creameries 

The large dealers now control a great number of the cream- 
eries in the country districts. In Maine 55 of the 72 creameries 
are owned by 4 companies. The city milk distributing plants 
are in their hands, so that with cars collecting and receiving sta- 
tions and city plants all in the hands of the dealers, the coun- 
try producer is bound to receive only what the dealer is willing 
to allow him. 

Let us for a moment follow the course of one of these cars, 
bringing milk to Boston. The Northern Vermont farmer, say 
in Newport, takes his milk to the station in the early dawn and 
loads it on the train, (or if the car is filled at Newport the train 
leaves there at midnight for Boston, milk is picked up along the 
route, arriving in the city 12 or 15 hours later.) 

On crossing the Massachusetts line the car is sealed to avoid 
trouble with the Massachusetts authorities who forbid cars to 
be operated under a leased system, but owing to a ruling of the 
Interstate Commerce Commission, Massachusetts cannot pre- 
vent sealed cars from crossing its territory. If the milk is des- 
tined to one of the large dealers the car is shifted to the receiv- 
ing station wjcieve the cans are unloaded, the milk emptied into 
large tanks, pumped to the top of the building and from there 
10— -M. F. c. 



^46 MAKKKTING AND FARM CREPITS 

begins tlio pnu'essiug. oonsdstiiig of elarifyinar, pasteurizing, oool- 
ing. bottling or eaunitig. aooorviing to the trade it is to supply. 

Age of Milk When Reaching Consumer 

AVlveu the ear arrives in Hostou the milk is estimated to be 
m->iu 24 to 4^ hours old and to be from 3o to JHl hours old when 
it reaehes the eonsumer. The city delivery outtits of the deal- 
ers have changed a good deal of late yeai*s aitd while the hoi-se- 
drawn \ehiele still predeuiiuates in the family delivery, the mo- 
tor truck is largely used in wholesiUe deliveries. 

Thest^ givat eity plants of the dealers have in nmny eases 
involvtxl the expenditure of hundrt\is of thousjinds of dollars 
and most of them are built on modern sanitary lines. The com- 
panies controlling them are gtMuu'ally stoi'k companies, employ- 
ing the best ability and utilizing business nu^thods to the fullest 
extent. 

Besides the leasi\l car system, milk is handled by expri^ss com- 
panies at the general traftic rates, as excess baggage on pub- 
lished taritfs of the railroad, on tivlley cars in some sections, and 
by motor truck within 40 miles of large centers. 

The rates for the leased eai"s on a zone basis ai^e: 

1. Zone on Boston and Elaine. 1 to "o miles, $125 per mile 
per year. 

2. Zone Tii to 12o miles. $112. oO per mile per year additional 
to $125. 

3. Zone 12l> miles and over, $75 per mile per year in addition 
to $237.50. 

Maximum chargt^ $18,000 per year. 

Miniuunu charge $5,000 per year. 

This is for passenger train service ; 25 per cent discoiu\t for 
fivight train service. 

The minimum load is tixed by the railroads, varying from 8.^^25 
quarts to 12.000 quarts when an extra charge per qmirt is made 
for excess. On some roads the civam rate is 50 per cent higher 
than milk and while this is not trtie in all cases, attempts are 
Iving made by the raili\>ads to raise the price on ctvam. 

Systems of purchasing milk from the farnter varies with the 
location and generally depends upon the dealer who is operating 
in the territory. Some buy on a per can basis using the 8^^ 
quart can as the unit, and prices range from 25 cents to 45 cents. 
There is usuallv a ditfereuce between tlie s\nnmer and winter 



WILFRID WHEELER 147r 

prices. On the 100-pouiid basis rates vary from $1.10 per hun- 
dred pounds in June to $2.20 in December. 

In sonu^ cases bonus is paid for a good barn score. Another' 
method is that of butter fat basis plus skim milk, as for examj)kv 
one concern pays 1 cent per (juart for skimmed milk and pays 
for the fat at market rate which varies fi'om 25 to 39 cents per 
pound. Cream is generally purchased on a butter fat basis only. 

The wholesale price which the farmer receives for his milk 
varies froui 2^/2 cents per (juart in remote districts to 6 cents in 
certain sections near large centers where a high class milk is in 
demand. There has been so nnich sharp practice about paying 
farmers for their products that numy of the states have enacted 
bonding laws which provide that any dealer doing a milk buying 
business in tlie state shall furnish a bond satisfactory to the state 
official and this bond shall secure the prices paid for the milk 
purchased in the state. (Contracts, howevt^r, are made with the 
farmers varying from weekly to semi-annual payments and in 
many cases no contracts are made at all. 

An analysis of the various costs of each operation in the hand- 
ling of milk shows that collecting varies from .006 to .003. 

Country plant, when pasteurized in country 007 .004 

Railroad transportation 005 .004 

City plant — minus pasteurization 005 .013 

Distribution — family trade 03 . 021/. 

retail stores 02 .009 

" wholesale trade 005 . 01 1 

Total Cost of Producing and Handling Milk 

Thus we see that the cost of milk handling and processing is; 
about 21/) cents; that the cost of distributing to family trade is. 
about 3 cents, and that to the retail stores about fi/o cents ; to the- 
wholesale trade '% cent. When we add the price paid to the 
farmer to this cost of handling and distributing, we have the fol- 
lowing cost of bottled milk delivered to consumers : 

Price to farmer 2y2 — 4e 

Processing 2l^ 

Delivery 3 

8 — 91/.C- 



14$ MAKKKTINO. ANP VWKM CUKPITS 

Ono big fju'tor whioh ontoi-s into the oc^t of doliverina: niilk in 
bottles is the lnvaka^\ which has to bo Kn-no by tho dealer. 
The extra eost of pasteuriziuir. while adding to the expense of 
pnx'essinir. has not uvaterially tignred in a rise of prioes as yet. 
Other ei^ts sneh ;vs ieing cans, handing \nilk at stations, hgher 
priivs of labor, depreeiation on cans, have all had their shan^ in 
the srenend pwbletu. and in eoniplaining alK>nt the high prices. 
eonsnniei*s are not apt to consider these caivfnlly enongh. 

Many attempts have been made to rednce the ci^st of fauiily 
distribntion. Municipal distribution has been snggi^sted : an- 
other suggi^stion is to organize one (.^^nvpany for this purpi^se 
alone, but as yet nothing has been done. The deaU^rs' objtv- 
tion to central plant delivery s<\mus to be based on the loss then» 
would be in teams and tinicks standing idle after they had made 
the etMitral delivery, also of the diftieulty of stacking the various 
sizevl containei"s; also that eustomei*s might not be able to get 
extra milk of the br;\nd they are usixi to; that the U>ss in Ixntles 
would be givater. and that theiv would be extrjv expense involved 
in eolUvting bills an*.^ soliciting trade. 

That many of thest^ objections might be removed by the dealei's 
stH^kiug to standardize containers and products, to centralize 
milk stations and in general to coopei^^te with each other d(.x»s 
not seem to have enteivd their minds. That dealers can iwiuce 
the cost of operating and distributing so that thert^ will be a 
largin* demand for clean, whole milk is certainly possible. 

Milk Still the Cheapest Food 

Consumption prices vary with the quality of the milk, although 
theiv is no standarvUzi\tiou by states or cities. In a few eases. 
dealers and pnxlueers near to the city are guaranteeing a 5 per 
cent milk for which they gi^t a high price. Oeneral prices rangt* 
around 8 to 10 cents for ordinary bottUxl milk to famil^v trade ; 
6 to S cents for retail store tnule. and from 5 to 7 cents whole- 
sjvle. Cream, which is not sold on any standai\l basis ratxg^^s in 
l>rioe from oO to SO cents per quart to family trade; llo to oO 
cents to retail stoivs. and from 20 to 4- cents per quart wholesjde. 
As far as price is concenied. the consumer really has nothing to 
eomplain of: for did he but know it. at ptw^in^ prkts milk 
is the cheaptst and nutsi diijeatihle ftnnl than can bt> bought. If 
<*onsumers want fancier conditions in the production of milk 



WILFRID WI1EEL1<:R 149 

llicy imisl, be ready lo pay for i1, aiul it is inevitable that the 
1eiul(Miey oi" milk |)ri('es will be (ovvai'd a. liif«liei' lev(^l. Tilie 
raniier in Massacluiselts anyway must {jjet an average ol' 5 cents 
or better the year around lor his milk, ami while the time nuiy 
still l)e distant, sooniu- or latei- dairy farnuvrs will form an or- 
}»aniy.a.tiou strouj»' enough to demand it. It is safe to say that 
an. additional cent a (jnart on the price to tht; ra,rnu>r woidd do 
uuu-e to lu'lter dairy conditions than all lh(> i-estrictive legisla- 
tion thatiluis ever been passed. Undoubtedly with a I'ise in price 
a. much larger supply ol' milk would be produced and in order 
lo take care of it a. coucei'ted adv(>rtising caiupaigu on the Food 
value of milk will have to b(^ \indertakeu by dealers with the idea 
of increasing consumption. 

How Advertising' Can Increase Use of Milk 

As a, nuitter of fact such a. campaign should be undertaken any 
way as the consumption of whole milk is actually on the decrease, 
while that of cream has greatly iucreast'd. Many causes have 
helped in tlie decreasetl consumption of whole milk, among which 
are the lack of knowledge on the part of the consunu^r as to foo<l 
value of milk, the use of milk powder, coiulensed' and evaporated 
milk, both by bakeries and in the homes, and the lack of confi- 
dence on the part of consumers owing to continued agitation by 
crank reformers. On the other hand, the iiicnvise in the use of 
cream is largely due to the greater use of this pi'oduct in siuiuner 
for making ice cream and various summer drinks, and also to a 
nu)re expensive scale of living on the part of a large proportion 
of our population. So far as can be gathered, the shipment of 
milk to Boston amounted to about 104,035,461 quarts last year, 
coming from Maine, New Hampshire, Vermont, Connecticut,, 
Massachusetts, Khode Island, New York and Canada, while the 
year before 106,672,315 (puirts were brought in, showing a de- 
crease of over two and one-half million (piarts. This can be par- 
tially accounted for by the fact that the increased receipt of cases, 
of condensed milk amounted to over 100,000 in the came period. 

The chemical standard for milk in tlie New England 'slates; 
varies widely, but an effort is now being nuule to pass a uniform 
law for the 6 states in regard to the chemical .content. At pres- 
ent the standards ai"e as follows: j 



150 



MARKETING AND FARM CREDITS 





Per Cent 
Total Solids 


Per Cent 
Solids 
Not Fat 


Per Cent 

Fat 


Per Cent 
Cream 


Per Cent 

Skimmed 

Milk 




11.75 
11.75 , 
12.15 
12.00 
12.00 
12. 50 


8.5 
8.5 


3.25 
3.25 
3.25 


16.0 
18.0 
15.0 
18.0 










9.3 


New Hampshire 

•Rhode Island 




8.5 




2.5 






9.25 















* In May and Jiine the solids are 12> per cent. 

While there are no grades established for milk throughout 
New England and while the standards of butter fat and total 
solids vary in the different states, stall there is a highly organized 
system of inspection, especially by the state of Massachussetts 
as well as cities and towns all over New England, and certain 
Ikinds of inspection are done by the milk dealei-s themselves. 
This inspection might well be classed under 3 headings: 

1. City inspection or laboratory work on the milk itself. 

2. Country inspection by the agents of cities, towns, states, 
and by the government of farms and country shipping stations. 

3. The more or less general supervision given to all this by in- 
spectors employed by the state. 

Boston maintains a corps of 8 inspectors who visit, in so far 
as possible, the 7,600 dairies from which she draws her milk sup- 
ply, and at the same time maintains an elaborate laboratory in 
Boston where analyses are made of the milk taken from farms, 
imilk stations, wagons and stores. 

The splendid supply of milk in many of the small cities and 
towns is entirely due to the work of these inspectors, of which 
there are about 60 in Massachusetts, and who, on their visits to 
farms supplying milk to their cities, have been able to get the 
farmers' confidence and by so doing to realize the benefit to all 
concerned in improving the milk supply of the state. 



Need of Tact in Milk Inspection 

Unfortunately, in Massachusetts at least, milk inspectors have, 
in many instances, by antagonizing the farmer, done mucfai to re- 
duce the quantity of milk produced and consequently the number 
of cows kept. 

That it is possible for towns to cooperate for better inspection 
iis proven by the work of 8 to\\Tis in the Metropolitan district, 



WILFRID WHEELER 151 

Wellesley, lielmont, Canton, Frarainghara, Melrose, Xeedham, 
Weston and Winchester. These towns with, a combined popula- 
tion of 60,000 now maintain a cooperative laboratory for the pur- 
pose of making bacteriological and chemical tests of milk. A 
milk inspector is employed by the 8 towns, and in this way 
the inspection of dairies and monthly tests of milk can be made 
more cheaply and satisfactorily, as it pays the inspector to give 
his whole time to the work. 

Our farmers, like those of the rest of the country, are averse 
to cooperating in any movement which if condcted prop- 
erly would lead them forward to better things. Still there are 
some cooperative creameries in New England and in favored lo- 
calities they are doing fairly well. There seems to be a move- 
ment in Vermont to establish more of these cooperative cream- 
eries, as it has been pointed out to the farmers that it is a sui- 
cidal policy to sell their whole milk for less than the value of 
the butter fat it contains. 

Cooperation in cow-testing associations is growing but as yet 
no report has been received of any cooperative selling organiza- 
tion controlled by the farmer. 

That all kinds of unfair methods have been practiced on the 
farmer because he has not organized is true. He has had to ac- 
cept discriminatory railroad rates and low prices for his milk; 
has not received an adequate return when paid on a butter fat 
basis, has seen attempt at organization fail when persons sup- 
posedly trusty have proved unfaithful and while cooperation 
may solve this much vexed question, the difficulty lies in proving 
this to the farmer. 

In summing up the whole milk situation in New England, the 
factors which stand out most prominently in the marketing ques- 
tion are : 

The wide geographical distribution of the producers whose 
whole products come to one. market. 

The utter lack of knowledge of the costs of production by these 
same producers. 

Their utter lack of cooperation (to standardize their product) 
in production, shipping and marketing. 

The absolute control of the transportation of milk by the 
dealers using the leased cars and their further monopoly of the 
city markets by controlling the milk stations, and through the 
control of both trains and city delivery, their ability to dictate 
prices to the farmer. 

The lack of a definite grading and a standardization system. 



]52 MARKETING AND FARM CREDITS 



THE DISTRIBUTION OF WHOLE MILK IN 
THE CITY OF CHICAGO 

W. J. Kittle 
Secretary, The Milk Producers' Association 

I come to you today representing 12,000 farmers, called dairy- 
men, with a capital invested equal to $300,000,000. This is 
the working, foundation of what I have to talk about this after- 
noon. These men are scattered over a territory reaching out 
about 100 miles in the surrounding country, in circumferenc? 
about the city of Chicago, and are shipping the product to the 
city of Chicago, that it may be distributed here. They repre- 
sent or control 375,000 cows and they must have these cows on 
their farms for several reasons ; but for 2 in particular, and 
I wish to take these up just a few moments later. 

Now, as to why these men here are in the milk business, first. 
They are tributary to a fine market here in Chicago. I do not 
mean to infer or say that they are within hauling distance of 
this great market of Chicago, which is probably the greatest mar- 
ket in the world. I do not mean to say that, when I say that 
they are on the threshold of that great market, — I do not mean 
that they are within hauling distance. But I do mean to say 
that we no longer count miles as to distance, but we count in 
hours, and this market is within a 3-hours' run of us, — this 
great city of Chicago. Chicago is within 3 hours' ride of the 
territory from which it draws its milk supply, for taking care 
of its people in their requirements. 

The first condition is this threshold proposition, and then the 
second is the taking care of the land. It is no longer doubted 
for a moment that if we let our land go without this fertilizer 
it will soon refuse to produce. We have thousands and thou- 
sands of acres in southern states that proves that and we have 
other thousands of acres in our own state of Illinois, that also 
proves that, — that where the cow is not there is no equitable 
product. 

I myself, am old enough to know and remember instances 
where we are not able longer to raise over 6 or 8, or a possible 10 
or 12 acres of wheat on the finest land in my county. I recall 
just such a condition and that was some 35 years ago, while to- 



W. J. KITTLE 153 

day, or 1914, on that same land they raised 40 bushels of wheat 
to the acre. No cattle, no manure ; no manure, no fertilizer. I 
will tell you why: Cows, manure; fertility and crop. No 
cattle, no manure; no manure, no fertility; no fertility, no crop. 
Thousands and thousands of acres south of here, south of us 
here between here and St. Louis, — thousands and thousands of 
acres down there are not producing more than 6 or 7 or 8 bushels 
of wheat to the acre. And why? No fertility. No cattle, no 
fertility. No cattle no manure ; no manure no fertility ; no fer- 
tility, 6 bushels of wheat to the acre. These are some of the 
reasons why we must have our cows up here, and where cattle 
are now commanding the attention of the whole world, and its. 
people are looking at them because of the fact, because the bet- 
ter cows will give more. milk — because of the fact there will be 
2 calves worth $35 each at the end of 2 years, and the cow 
will still have as much value as though she were a steer and had 
been kept and fed for 2 years. 

Why Costs of Milk Production Are Rising 

They want her not only for the beef production, but they 
want her — they get out of her 2 calves and still have her to 
send to the market. Those are some of the things that make us 
stay in the dairy business here around Chicago. 

However, the high value of our land is causing the people to sit 
up and take notice of our immediate needs. And then we have 
to contend wdth the continued low prices of our produce, as just 
talked to you. The continued low price paid for our product is 
another thing that is causing the farmer to sit up and take no- 
tice of his business conditions. 

Better business methods are beginning to come to the farmer 
because of the fact that he is beginning to realize that he is losing 
money on the job, and he cannot continue to stay in the business 
unless more money is going into it for him. We all are trying 
to reach a better standard and it costs money to get to that stand- 
ard which they are now asking us to reach in our dairies, and 
yet the price to us on our product, has not advanced one-half a 
cent— one-half as fast as the standard has advanced. Milk that 
sold in Chicago at 8 cents — milk that is selling in Chicago at 8 
cents today actually sold in Chicago 10 years ago at 8 cents a 
quart. There has been no advance in the retail price, and then 
when you undertake to show the cost of delivering it — the cost 
of delivery has increased and that cost does not come out of the 



i;>4 MARKETING AND FARM CREDITS 

meu who dolivor it to the (.'ousuiuor. but out of tho uVoii wlio 
iitand back of hiiu. and who produoo tho produot. 

What the Farmer Gets for Milk 

The avovngo prioo paid to tho faruior for his milk is 3 1-24 
oents per quai't. I say that is the average prioo. All milk is de- 
livered and sold at the standard of 3.3. The city ordinanee re- 
(luires the basis of 3.3. and I tigiire that it is bought on the 
basis of 3.3. And that san\e milk is sold at 8 eents a. quart. 
We sell it for 3 1-'J4 eents a q\iart, and it is sold for 8 eents to 
the eonsumer. 

The farmers are beginning to realize and learn that unless 
they have eertain eonditions on their farms in regard to their 
dairy, tliey are shut out by this and that plant wliei-e they can 
deliver their pnuiuet and they are refused aeeeptanee of their 
milk. It was done very seriously last fall. These men weiv 
seoring their dairy so low that when tl\ey tig\ired the improve- 
u\ents and eonditioiis that had to be met their dairies are no 
longer a piMtit to them and they have to get rid of some of their 
stoek aaui buy Tiew. The eost is getting to be so lu^ny that 
the farmei'S are unable to bear it and meet it and make any- 
thing out of the proposition. 

Let me just tell you something: We have instanees of men 
who eoTue into our dairies on our farms and they ean often lind 
no exeuse whatever for tinding any fault with the farm or the 
dairy, and yet over in one eorner just beeause there isn't a 
window or some sueh thing, they often suggest that he must 
have the right kind of light and the right amount of light in his 
barn and he n\ust put in a window there. 

As a nuitter of faet that wiudow is not any more neeessary 
than it is in our houses, but we must do that or have tlie market 
shut our milk out. And we must b.ave siinitary milk stiH">ls 
and sueh things. 

Those are some of the things. All sueh foolish things are done 
by n\en and for the men who give them a job. and they think that 
they nvust make good in son\e way and report something wrong. 
They go into a barn and say to a man that owns the barn. "You 
haven't enough light in your barns for the eattle. ** and then 
the num turns to them and asks them how mueh light do we have 
to have. He says that he does not know, aiui then the farmer 
savs, "How do von know what I should do?" 



W. J. KITTLE 155 



Intimidating the Farmer 

'I'hese things are intimidating the farmer, because we know 
tlhat a repont like this will result in word coming to us from Chi- 
cago, saying that we must hold our milk home until we are in- 
structed by the board in Chicago to put our milk in again. I 
will go ini to see the authorities in Chicago and ask them what 
is wrong. He gets out his report to see 'w^hat was to be done 
there, ajid I show him that I have provided the windows re- 
quired in our barn, and he says, "I didn't unders)tand it, and 
you may go ahead," but I have been held out and I have lost 
tlie difference between what I should have made and what I have 
kept at home, and whidh I must dispose of as best I can. 

Those are some of the conditions we are meeting in Chi- 
cago, all the time. I am not saying that the men who boss 
these inspectors are entirely to blame, but I do say this, that 
incompetent men do the inspecting, and that sometimes gets us 
into trouble and is causing us more trouble all of the time, 
and we are suffering for it. 

The Chicago milk buyers are able to buy milk so low that 
they are able to sell it for 3 times what they pay for it. 

The producer must make his milk off land that costs from 
$150 to $250 an acre, and the interest on which is $12 an acre 
to start with. He must make that same milk from cows worth 
$100 each and feed them concentrated feed at a price of from 
$20 to $30 a ton. All this, to produce milk at $1.60 per hun- 
dred pounds. He gets $32 per ton for the product made by 
the use of feed that costs $35 to $40 per ton. I want to ask 
you this afternoon, if you (can do it? We cannot, and it is im- 
possible for us to make $32 a ton milk out of $35 a ton feed and 
continue. 

We cannot do it unless we have a side issue. Of course, 
they say to us, "You have all these side issues, fertilizer and 
young cattle to sell and hogs, etc." And so we do. If we did 
not we would have to leave the farm now. And men, I have 
this to say to you, that I have seen sale notice after sale notice 
all over the country down here, and every one of those bills 
say, "Having decided to quit dairying, John Jones will sell 
his farm." One man who is also a landlord and with boys in 
his home to help him in his work, sold out saying, "I cannot 
stand it any longer." He is quitting farming because he says, 
"I can no longer make $32 milk out of $35 a ton feed." These 



156 MARKETING AND FARM CREDITS 

iu-e some of the eases 1 Avaiit to tell you about. These are 
some of the eauses. 

The Dairy Farmer's Dilemma 

And when men are unable to take eare of their boys, — what 
are tihey to do? There is a man seated in front of me this 
afternoon, who said he was unable to take eare of his boys 
without putting them into other jobs, and Avhen that eondi- 
tion happens, men. no wonder that boy drifts to the eity and 
the girls follow. 

I am not talking to you on this subject, just to be talking. 
I am putting to you, men, this afternoon, good, solid, hard, cold 
facts, and we are trying to right these conditions we have 
every day. 

The father and the son and the daughter and the mother, 
and all the rest of the family work from 4:00 o'clock in the 
morning luitil 8:00 or 9:00 o'clock at night, to produce and 
gather together the necessary feed, such as hay, grain, etc. to 
feed the cows and to care for them. They work thus together 
all year round, and at the end of the year, with combined econ- 
omy and labor, they Anil not be able to save enough money to 
just pay the daughter, if she sat at the typewriter for a year 
in some office. 

That is no exaggeration. I am telling you this afternoon 
that that is the case. Your daughter could make that amount 
of money sitting at the typewriter for the year, and yet, that 
whole family has worked from 4 :00 o 'clock in the morning to 
8 :00 or 9 :00 o'clock at night to bring about the result she does 
by working from 8:00 in the morning to 4:00 or 5:00 o'clock in 
the evening. And she would have gotten the same amount of 
money for it I am telling you. 

Do you M'onder why they don't stay on the farm? I do not. 
Do you wonder why they try milking machines ? 

The state experimental stations have decided that no man 
can make a quart of milk, and get a profit out of it cheaper 
than at 5 cents a quart. No man can make a quart of milk 
and make a profit out of it on the farm unless he gets 5 cents 
for it. 

But we are not asking that. We are asking of the men who 
sell the milk that they divide "fifty-fifty" with us. We are 
asking for 4 cents. A speaker at this conference said that 



W. J. KITTLE 157 

they got 4 cents in the East. Three and one twenty-fourth 
cents is what we got during the entire last year. 

Now, I am putting up to you this proposition this afternoon. 
All that we ask is one-half of what they are getting. The con- 
sumer pays 8 cents a quart, and we are getting 3 1/24 cents. 
We are asking for a "fifty-fifty" division. If they sell their 
milk for 7 cents, we are willing to take Si/o cents. But 
they ai-e not. They are selling it for 8 cents, and as has al- 
ready been told you this afternoon, the cheapest thing that 
goes on our tables today, is that quart of m!ilk at 8 cents a 
quart. No other article of food on the table, is as cheap as 
that is, or anywhere nearly as cheap as 8 cents a quart on 
this milk. Eight cents is the price it has sold for and has 
been sold for for 10 years, and' so, this afternoon we say that 
we are only asking for one-half of that. 

Dividing the Consumer's Dollar 

Think of it. Of the consumer's dollar, when we get 3 1/24 
cents a quart, we get 27 cents of that consumer's dollar, and 
they get 73 cents. I do not know what it costs the Bowman 
Dairy Company or Borden to deliver their milk in the City of 
Chicago. I do not know that. I do know that it costs us far 
more than 3 1/24 cents to make our milk on the farm. 

I do not need to go into the figures and work it out for you. 
You know that; I know it. "We are willing to divide with the 
man who sells it at the other end of the route, and if he sells 
it for 8 cents, — if he can stand to sell it at 8 cents and deliver 
it at 50 per cent, we will try to stand the other 50 per cent. 
That is all we are asking. 

Dealers have overhead expenses. But the producer has not 
only his overhead expenses, but his basement expenses. He has 
all that and more, and at the end of the year he must have been 
very careful to get 3 per cent on his investment. 



158 MARKETING AND FARM CREDITS 



TURNING THE POTATO LOSSES INTO 
FARM PROFITS 

H. E. HORTON 
Agricultural Commissioner, American Steel & Wire Company 

Standardization is the nubbin of marketing. Grading is un- 
satisfactory or impossible ^\'ithout the means of using the off" 
grade stock at a profit. The production of potato flakes and 
potato starch, solves the question of marketing. 

There is an erroneous opinion prevalent that new lands in 
the potato growing districts do not need fertilizers. I have 
traveled a number of times over the Michigan district and 
spent several years in the Wisconsin district and I have never 
seen any peculiarity in the light sandy loams that characterizes 
the potato growing districts that would except them from the 
necessity of using fertilizers. 

There are specially favored regions in the United States 
where the potato grows to perfection. At present, in all these 
localities, the production per acre of potatoes could be in- 
creased, and the quality, from the industrial standpoint, greatly 
improved: the first, yield per acre, by the intelligent use of fer- 
tilizers; the second, low quality, by plant selection or the intro- 
duction of new varieties. 

There is no good reason why these potato districts should be 
held back in their legitimate development that more corn may 
be grown in the corn belt. 

The great obstacle to potato gromng is ignorance — ignorance 
of production and possible industrial uses. Another serious 
obstacle to potato growing is the defective marketing systems. 
The root of the marketing question is grading or standard- 
izing, and the establishing and maintaining of a standard is 
only possible when there is a profitable use for stock which 
does not come up to the standard. 

Another obstacle to potato growing is the occasional abnor- 
mally big crop that is handled in a manner to demoralize prices 
and discourage the grower, A means for converting the ex- 
cess production of a year into non-perishable form will take 
care of the big year. 



H. E. HORTON 159 

In the United States, economic thought has not grown to the 
point when an analysis of the uses, to which a crop is put, re- 
ceives deserved attention. Obviously the uses for potatoes 
are the table, industrial, and livestock feeding. A priori, there 
is no reason why more potatoes should not be used on the table. 
why high grade potato starch should not be made at home, and 
not imported, why feeding livestock with potatoes should not 
be a general practice. 

To learn of the opportunities connected with a big potato pro- 
duction it is only necessary to turn to Germany and study the 
production and uses of the potato crop. 

Area Devoted to Potatoes 

A careful census shows in one year in Germany the produc- 
tion of 1,579,533,333 bushels produced on 8,151,000 acres (the 
potato acreage in the United States in 1912 was 3,711,000 and 
the production 420,647,000 bushels, a little more than a quarter 
of the German production). 

In Germany potatoes occupy two-thirds of the total area 
given to tilled crops, and this means 12.3 per cent of the total 
area. 

Uses Made of Potatoes in Germany 

Economic studies in Germany are well advanced and a study 
has been made of the uses of potatoes. The following figures 
are very interesting and should be of great interest to every- 
one in this country interested in the production of this crop : 

440,800,000 bushels of potatoes used on the table ; 

91,833,333 bushels of potatoes made into alcohol ; 

51,426,666 bushels of potatoes made into starch ; 

191,013,333 bushels of potatoes used for seed; 

646,506,666 bushels of potatoes used for feeding 

cattle : 
157,953,333 bushels of potatoes lost (10 per cent of 
total production). 

The potato furnishes 25 per cent of the necessary food of the 
people of the German Empire. 

In the families of the German workingman "potatoes consti- 
tute 50 per cent of the food consumed. 



160 MARKETING AND FARM CREDITS 

Dried Potatoes or ' ' Potato Flakes ' ' 

The drying- of potatoes is an almost imknoAvn art in the 
United States, while in Germany it is a well established, profit- 
<ible business. 

In Europe potato tiour is used regularly, and speeial cook 
books are published for its utilization in all kinds of bakery 
goods. The immigrants from Northern Europe, accustomed to 
the use of potato tlour. have created a market for that com- 
modity in this country. In 1913, the last government report 
we could obtain, showed 16,710,498 pounds of potato flour and 
starch imported. The war cut ott' the supply, but the demand 
still exists and there is an excellent chance to make big money 
manufacturing potato flour in this country from the unsalable 
potatoes and the culls, now almost a total loss. 

Potato flakes can be turned almost instantaneously into 
mashed potatoes, the great American national dish, and when 
put up in neat and attractive cartons, sold at the grocery, the 
flakes certainly will find ^a ready market. In mining and log- 
ging camps, where fresh potatoes are scarce, flakes would fill 
a long felt want. Flakes would also be welcomed by the busy 
housewife in large cities: "Bring to a boil and serve," which 
has been the slogan for other commodities, would be appre- 
ciated and accepted to save the trouble of boiling and mash- 
ing the potatoes. 

But where potato flakes will become indispensable, once in- 
troduced, will be in the army and navy and the fitting out of 
■camping parties. Other vegetables can be canned, but the can- 
ning of potatoes has not proved to be a success. Dried pota- 
toes can be kept almost indefinitely, and besides this, another 
marked advantage of the drying process is that it reduces the 
weight of the potato about three-fourths, and this pennits the 
shipping of potatoes in dried form great distances without 
danger of deterioration. 

Before the European war the Chicago importers sold potato 
flour at 5 and 6 cents per poimd in bulk. 

"Potato Flakes" or Food for Livestock 

Added to the use of flakes for human consumption potato 
flakes is a most important feedstuft' for farm animals. 

Horses eat the flakes readily and during a long period show 
no aversion to the food. Fed on flakes the animals have a no- 
tticeably "better fed" look, and they perform hard work with- 



H. E. HORTON 



161 



out any bad effect. No indigestible food is found where flakes 
are fed. Colic is less common. 

Health, working capacity, and endurance are maintained by 
the use of potato flakes. 

If times permitted the same good effects could be described 
when the potato flakes is used for swine. 

Naturally potato flakes lacks protein matter and this sub- 
stance must be supplied by one of the other ingredients of the 
ration. (This is true of the other feedstuff s having high starch 
content.) 

Naturally many different means have been proposed for dry- 
ing potatoes, but one only has forged ahead to become a com- 
mercial success. 

The successful process is one of great simplicity and conse- 
quently lends itself perfectly to the establishmient of the small 
country unit, the ideal end. This process consists in steaming 
carefully cleaned potatoes, mashing and drying the mashed 
material on revolving steam drums or cylinders. 

Composition of "Potato Flakes " 

The dried flakes ready for use have the following composition : 
tion: 

Moisture 12 . per cent 

Albumen (protein matter) 7.4 per cent 

Fat 0.4 per cent 

N-free extract 74. per cent 

Fiber 2.3 per cent 

Ash 3.9 per cent 

100.0 per cent 

Naturally the yield of flakes depends upon what substances 
are in the raw potato and their quantity. 

Composition of Raw Potatoes and Yield, of Flakes from 100 lbs. Raw 

Potatoes 



Starch Content 

Dry Matter Content 

Yi«ld Potato Flakes Containing 
15 Per Cent Moisture. . . . 

Yield of Potato Flakes. . . . 









Pounds 






12 


14 


16 


18 


20 


22 


17.8 


19.8 


21.8 


23.8 


25.8 


27.8 


20.9 


23.3 


25.7 


28.0 


30.4 


32.7 


12.54 


13.98 


15.42 


16.8 


18.24 


19.62 



24 
29.8 

35.1 
21.06 



11— M. F. C. 



162 



MARKETING AND FARM CREDITS 



The kind and size of an agricultural industry possible to es- 
tablish, in a farming community is determined by the degree 
of culture or development of the people in the section. 

There are many localities in which simple manufacturing 
processes might be established to work over the produce of 
the section. There are a few localities in which a fairly devel- 
oped process might be established vrith success. AVith a single 
exception, it is doubtful if there is a locality in which the 
highly developed industry may be successfully operated. Re- 
ferring this thought to potatoes, this means that there are 
many localities in which potato flakes might be made, few lo- 
calities in which the industrially more developed potato starch 
might be made, and it is doubtful if there is a locality where 
alcohol from potatoes might be made. 

Stardi From Potatoes 

It will be of interest to make available information on the 
subject of how much starch may be obtained from potatoes. 
The following table gives this information: 

Yield of Dry Starch per 100 Ihs. Raw Potatoes 



Per Cent Starch in 
Raw Potatoes 


Very Good 
Factory Work 


Good 
Factory Work 


Medium 
Factory Work 


Poor 
Factory Work 


12 


Lbs. 
10.8 
13.2 
15.6 
18.0 
25.2 


Lbs. 
9.9 
12.3 
14.7 
17.1 
24.3 


Lbs. 
8.3 
10.8 
13.2 
15.6 
22.8 


Lbs. 
5 4 


14 


7.8 


16 


10.2 


18 


12 6 


24 


J9.8 







In the production of potato starch there is produced a by- 
product of some value in the feeding of domestic animals. 
This by-product, potato pulp, has the following composition: 
Water, 86.0 per cent; ash, O.-i per cent; fibre, l.S per cent; fat, 
0.1 per cent ; protein, 0.7 per cent ; N-free extract, 11.0 per cent. 
The nutritive ratio of this potato pulp is a very wide one, 
namely, 1 :14.6. 

This pulp may be fed cooked or ray, but on the whole the re- 
sults from feeding the cooked pulp have been the better. To 
balance this ration dry substances and protein are needed and 



H. E. HORTON 163 

the following ration for a 1,555 pound milch cow is a good one : 
8 pounds hay, 50 pounds pulp, 7I/2 pounds stray, 2 pounds cot- 
tonseed meal cake, 1 pound palm oil meal cake, % pound meat, 
meal, Y2 pound peanut meal. 



THE STANDARDIZATION OF FARM 
PRODUCTS 



LEGISLATION FOR STANDARDIZATION 

Charles McCarthy 
Chief, Wisconsin Legislative Reference Library 

We in the United States, driven by the spur of the hig'h cost of 
living, and with the example of the organization of all other in- 
dustry before us, have suddenly awakened to the fact that our 
agricultural organization is in a chaotic state. The examples 
of efficiency such as presented by the Ford works, the recent in- 
vestigations of the department of agriculture in Washington, 
the studies made in Europe of standards and brands, have all 
resulted in a flood of legislation on marketing of allied subjects 
and especially on standardization. This is essentially a good 
movement, for without standards no real progress towards mar- 
keting efficiency can be brought about. To say standards shall 
exist and to define them is one thing, to carry them out is an- 
other. Ultimately no legislation will succeed without organiza- 
tion any more than legislation would successfully put into being 
the Carnegie steel works or the Ford works. We cannot say by 
law ''A standard o£ apples or a standard of butter is hereby es- 
tablished." We must have some organization to see that that 
standard is administered. 

The subject presents a hundred phases which cannot be 
touched in a shoirt paper of this kind. We hear returning stu- 
dents speak of the Danish brand or the Swedish brand or the 
Dutch brand but very few point out the patient care necessary 
to. bring these brands into being and the whole basis of standard- 
ization and organization necessary to bring about a brand. Stu- 
dents in our universities are too prone to think one can get up 
a livestock breeders' association or a potato growers' association 
and thereby standardize produce. It cannot be done in that 
way any more than it can be done by legislation. 

Where to Begin Standardization 

A potato growers' association may be organized. It is true 
that improvement of the seed may come to a certain degree 
through such an organization but, if you are to standardize po- 
tatoes over a large area, the ordinary farmer has got to see how 



iLxS MARKETING AND FARM CREDITS 

lie is goiug to got luouey out of it. That moans at ouco that those 
who have a certain staudard potato eau sell them together in 
such large quantities that they -u-ill get the whole beuetit of pro- 
ducing these stiindards. If farmer A has a few potatoes and 
ftu'mer B, live miles tmm there, has a few of the same kind of 
standards, they may not be any better off than if they pi*odneed 
any old kind of potato. Fannei's A and B and C and D and E 
and the rest of them must unite and get a warehouse where the 
grading can be done and a label can be put upon the sacks and 
where, by telephone or telegraph connection, the produce can be 
sold to the best advantage. Once you have this you can make 
the farmer see that his brand represents certain standards and 
those standards must be kept. If the organization is large 
enough and powerful enough like the Sun-Kist Orange, it can 
then ivgister its brand, advertise it and put it upon the market 
the same as any corporation would do but this requires a large 
organization and can't be done eveiy day. 

Federal Legislation Meets Handicaps 

How then can we arrange all grades for a kvality. for a state, 
for a nation ? We can an'ange, of coui'se, what the capacity of 
a barrel is or define a certain land of measure but when it comes 
to the quality of the goods or the grade there we are in difficulties 
at once. To do it in a national way in most produce at least 
seems an impossibility. I am aAvare of the existence of such laws 
as the U. S. staudard barrel law and the U. S. apple grading 
law — the so called Snlzer law. They may be of considerable 
use and they are of considerable use. After all they cannot be 
carried out effectively except by a vast system of education going 
over a long period of time. "We have many laws now coming 
on our statute books, such as the ^Massachusetts apple grading 
and packing law. When one looks at the definition of the differ- 
ent qualities or grades of apples set forth in these laws the diffi- 
culty of administering them without thorough organization is at 
once apparent. In the ^Massachusetts law the kinds or varieties 
for 4 different grades are deiined, — the maturity, how picked, 
color, shape, size, condition, diseases and fimgous gro"wth, insect 
injuries, bniises and other mechanical injuries, how packed, etc. 
"When one reads under the heading ** conditions " the simple word 
"sound", one is struck with the fact that that means nothing 
unless there is a vast system of education to show what a sound 
apple is. It, after all. must be backed up by an organization 



CHARLES McCarthy 169 

and a brand. No such definition can be carried out without an 
organization. It may be that the organization brand can be sup- 
plemented by a state brand as is done in many countries. The 
brand of the California Sun-Kist orange may be on the box and 
represents certain standards. There are also, however, many 
different grades, or producers who have their own brands. I 
think it well that a brand representing the state can be issued to 
all carrying out certain standards. This brand could be uniform, 
could be registered in the state and copyrighted nationally. All 
who graded in a certain manner any kind of produce could get 
the brand for that produce but would have to buy the brands 
from the state. All such brands should have numbers in serial 
in some way upon them so that, if the goods of a particular as- 
sociation happened to be picked up in the market, they could be 
traced back to the original packers and those packers held re- 
sponsible. 

An attempt to define too closely the different grades or quali- 
ties of different products will, in my opinion, lead to confusion. 

I do not think a human being lives who can define these 
grades for one state or for the nation. It seems to me that a far 
better way would be to create an administrative body and give 
this body the right to make rules. The rules should be made by 
this central body with the advice of those who are actually doing 
the marketing or producing goods so that the grades will not be 
too far in advance of the producer. Once these rules are made 
the law should then provide that whoever complies with these 
rules should be given a state mark of some kind with a serial 
number upon it and this should then be applied to all such prod- 
ucts. In this way the rules can be changed from time to time or 
grades established. In other words, the Commission would read 
the word ' ' reasonable ' ' in this act by this manner of doing busi- 
ness. 

Once the brand is determined upon by such a body it should 
be sacredly preserved and the state body should be given the right 
to advertise the brand. In this manner too it would not be hard 
to get uniform brands for certain kinds of goods reaching over 
state boundaries for a Commission from one state could meet with 
the Commission from the other and uniform rules could be made 
without going to the legislature. The producer of butter under 
this system could go to the state department when he produced a 
certain kind of butter under the rules laid dovra by the state de- 
partment and, in addition to his ovni brand, get a state label just 



170 MARKETING AND FARM CREDITS 

as it is done in Denmark. If one thousand manufacturers of 
butter got this state label, at once an organization would be 
formed and the products of all of these organizations would be 
practically made uniform. A system of self inspection would be 
established to keep up the standards, supplemented by occasional 
inspection by the state administrative authority. In this way the 
difficulty of exact defiiiition of grades would be avoided, uni- 
formity between states brought about, elasticity to meet the vary- 
ing conditions of trade accomplished, the ground work of organ- 
ized selling laid, the amount of standardized produce in existence 
statistically ascertained and a workable system arranged. It is 
my opinion that this would lead directly to real cooperation. 

I do not believe we can standardize produce without having 
the organization on the same cooperative basis as in Europe. We 
must, to get real standards, extend the quality of the goods down 
through to the most minute producer. We must standardize 
methods of production all the way down to get the standard at 
top and I maintain that this cannot be done without organiza- 
tion, cooperation, the establishment of control boards and cease- 
less education. All of this means the establishment of coopera- 
tive enterprises under cooperative law. State legislation, brand- 
ing, standardization and cooperation all go together. 



MARKET GRADES AND STANDARDS FOR 
FARM PRODUCTS 

Charles J. Brand 

Chief, Office of Markets and Rural Organization, United States Depart- 
ment of Agriculture 

To the casual observer the statement I am' about to make 
may sound both radical and improbable. Nevertheless, I be- 
lieve, after a careful consideration of the matter, that it is 
absolutely true, namely, that standardization is the funda- 
mental basis of progress in every field of effort. I think if you 
were to examine carefully into literary and religious progress, 
progress in the arts and sciences, as well as progress in com- 
merce and industry, it would be found that the greatest era of 
forward movement accompanied standardization whether in 
method, thought, construction, material, or otherwise. The 



CHARLES J. BRAND 171 

enormous modern development of the steel industry is due 
largely, though of course not wholly, to the standardization of 
patterns, processes, equipment and method. Today the steel 
products from hundreds of plants can be intermembered in the 
construction of any one of a thousand important types of struc- 
ture. The same, in a measure, is true of the essential parts of 
scientific instruments, and the great popularization of the mi- 
croscope is largely due to the standardization of oculars and 
objectives through which the "makes" of practically every 
manufacturer can be used upon the apparatus of every other. 
The chief subjects before this Conference are marketing and 
rural credits. Progress in these 2 departments of activity 
is just as surely dependent upon standardization as in any that 

1 have cited. As to rural credit, many other speakers will ad- 
dress themselves to this subject. Therefore I will merely say 
one word about it to emphasize the importance of standardi- 
zation. A sound, practicable, useful rural credit system de- 
pends almost absolutely upon standardization of at least 2 
things. There are probably many others, but without stand- 
ardization of title registration and the obligations that are to 
be issued as security, the institution of rural credit can scarcely 
become a successful one in this country. When 1 speak of 
standardization in these respects I mean standardization 
throughout every process involved in the issue of debentures 
of any character. 

Standardization Serves Two Great Purposes 

Coming now to the question of standardization for purposes 
of marketing and distributing farm products, to my mind 

2 great purposes can best be served by a thorough-going 
system of grades and standards. These are the furnishing of 
an accurate basis for price quotations, and related thereto, the 
furnishing of an adequate means for the dissemination of mar- 
ket information. "We can never have much progress until the 
buyer and the seller are discussing the commodity in the same 
terms, and that means that we must have grades and stand- 
ards not only as to quality, but as to packages and containers. 

Considerable progress has been made in the standardization 
of a number of products. It is probably true that they have 
thus far been applied more generally and successfully to the 
cotton crop than to any other farm product. "Wheat probably 
stands next in the degree of elaboration of grades and stand- 



172 MARKETING AND FARM CREDITS 

nrds for market purposes: then follo-vv corn and other cereals, 
and then of the products of great value probably comes but- 
ter, and so on through the list of agricultural commodities. 
There are relatively well-understood grades of the various 
kinds of hay, agricultural seeds, and to some extent of fruits 
and veget^ibles, but with reference to the latter the greatest 
diversity exists. 

Even in the case of products for which certain standards are 
recognized there is no uniformity. Take apples by way of il- 
lustration. In the box apple country of the Northwest where 
considerable progress has been made in grading and packing, 
three grades are recognized — Extra Fancy. Fancy, and Grade 
''C." In Colorado which is also a box apple section, the fol- 
lowing grades are recognized: Extra Fancy, Fancy, Extra 
Choice, Choice and Standards. 

In the case of the Northwestern fruit, ignoring for the mo- 
ment the question of variety, extra fancy usually means 163 
apples or thereabouts to the box : fancy from 188 to 200 : while 
grade C includes all merchantable fruit not included in the 
two other grades. 

In the State of New York, apple grades have been fixed by 
law under the following names : 

New York Standard Fancy grade. New York Standard ''A" 
grade, New York Standard "'B'' grade, and Unclassified. 

The well-graded New York fruit is said usually to be sold 
within the state, while the unclassified fruit is shipped to neigh- 
boring states. This represents a kind of dumping which is 
not altogether desirable, and which imiformity of standards 
would eliminate. 

State Action Difficult to Bring About Uniform Standards 

Several years of study forces the conclusion that only by 
legislation can uniform standards for quality and containers 
be erected. To illustrate the great difficulty of bringing about 
imiformity through the enactment of uniform state laws, I will 
cite the experience of only one enactment, though several 
others could be cited with almost equal force. In 1896 a con- 
ference of commissioners on uniform state laws completed the 
preparation of what is commonly known as the Uniform Ne- 
gotiable Instruments Act. In spite of much patient endeavor, 
the lapse of 19 years reveals that only 38 of the 48 states, the 



CHARLES J. BRAND 173 

District of Columbia, and the Hawaiian and Philippine Islands 
have adopted this progressive and valuable piece of legislation. 
If we depend upon legislation by the separate states, in the 
very nature of things, progress will be exceedingly slow and 
will have been secured through a very wasteful expenditure 
of effort. 

Standards for Cotton Grades 

The application of standards to cotton has already been men- 
tioned casually. The first definite reference to cotton grading 
occurs in connection with the marketing of cotton in Liverpool, 
England, about the year 1800. The records of cotton transac- 
tions prior to 1793, when Eli "Whitney invented his cotton gin 
show a growing tendency to differentiate qualities. The great 
increase of production resulting directly from the invention of 
the gin stimulated the need for standards of quality, so that 
by 1800 several had become fairly well recognized. There has 
been a gradual extension of trading in cotton by grade until 
now the major part of a crop varying in annual value between 
a half billion and a billion dollars is dealt in mostly on the 
basis of grades. 

In 1870, when future trading was introduced on the New 
York Cotton Exchange, grades were in use in this country, but 
in spite of the lapse of over a century, there are still no univer- 
sal grades for American cotton. In 1909, after careful inves- 
tigation by the department of agriculture under authority of 
Congress, a new set of cotton grades was prepared by the de- 
partment and issued to the trade. Although these grades were 
received with considerable satisfaction, they still apparently 
left something to be desired if they were to be put into use 
through purely voluntary action, as it developed between the 
years 1909 and 1913 that while many cotton markets took 
formal action of adoption, they, nevertheless, did not faith- 
fully use them. When Congress, after years of agitation 
throughout the cotton industry, enacted the United States Cot- 
ton Futures Act on August 18, 1914, a section was included 
therein covering the question of standards and making them 
compulsory in the settlement of all future contracts on the 
great exchanges in this country in case of delivery of cotton 
thereunder. 



174 MARKETING AND FARM CREDITS 



Working- Out New Standards 

Under tlie authority conferred by tlie act ou tlie secretaiy 
of agriculture, a renewed investigation -svas made and a new 
st^indard, ditforiug slightly in a number of respects from the 
one prepared in 1909, was elaborated and promulgated ou the 
15th day of December, 1914. That this standard wivs received 
■svith satisfaction by the trade is indicated by the fact that in 
less than a year in the neighborhood of 600 sets of the copies 
have been purchased by the trade. This is undoubtedly the 
greatest number of any cotton standard that has been issued 
in an equal space of time. Still much remains to be desired, 
particularly with reference to trading in American cotton in 
foreign countries. 

Kepresentatives of the department were sent to Liverpool, 
Bremen and Havre, the great future trading markets of the old 
world, in the hope of sectn'ing universal adoption. Thus far 
none of these markets has taken favorable action, though all 
are apparently agreed as to the excellence of the standard. 

Furthermore, there still occur a large body of transactions 
witliiu the United States based not upon the ot^cial cotton 
standards of the United States, but upon the Liverpool stand- 
ards, upon the old American standards, and upon ntnuerous 
locally recognized grades. However, conditions are improving. 

I have merely gone into this detail to illustrate what T be- 
lieve to be the relative hopelessness of securing uuiformity by 
any method other than federal legislation. 

This body will be interested in a few matters of detail which 
illustrate how carefully the work of standardization is done 
and how the results of it are safeguarded. Before the official 
cotton standards of the United States that were promulgated 
on December 15, 1914, were adopted, over 100,000 samples of 
cotton, taken from over 100 primary cotton-producing points 
througlunit the cotton belt, were carefully graded by the per- 
missive standard established in 1909. The suggestions and 
comments of the trade were secured and on a basis of many 
months of investigational work the necessary changes were de- 
cided upon. The chief complaint of the trade regarding our 
previous standard had been that it was too strict. In other 
words, it excluded cotton that was worthy of recognition. The 
new standard was applied to about 70.000 of the bales that 
had been previously graded, and it was found that approxi- 
mately V2 per cent more of the average cotton crop would be 



CHARLES J. BRAND 175 

included within the range of the new standard. Half a dozen 
sets of the standard, which had been tentatively agreed upon, 
were prepared by the cotton experts of the office of markets 
and rural organization, and then the most expert cotton classers 
of the great exchanges at New York and New Orleans were 
borrowed from the respective exchange authorities to assist in 
the final working of the types. 

When the last detail had been agreed upon, the work was 
approved by the secretary of agriculture and the preparation 
of 100 complete sets was undertaken. The copy of the stand- 
ard which is displayed here for your information will give you 
some idea of the labor involved. There are 9 grades of 
white cotton, and each grade is displayed by 12 types, mak- 
ing a total of 108 types in a set. About 600 sets have been 
sold in less than a year. Cotton for the standards is selected 
as far as possible to show properly the range of quality for the 
particular grade through the cotton belt. Not every type 
comes from a different state or different section, buc practi- 
cally every box represents from 4 to 7 different sections of 
the cotton belt. Many details of grade preparation have 
been incorporated in these standards that do not occur in 
any other standards hitherto ])repared. Credit for the de- 
vising of several of these features is due to Dr. N. A. Cobb, of 
the bureau of plant industry of the department of agriculture. 

The standards are sold with an agreement that they may be 
inspected during office hours any business day by the repre- 
sentative of the secretary of agriculture, whose signature and 
the certificate of grade may be cancelled if the grades are not 
found to be true to type. The price of a complete set is $20, 
which is just about the actual cost of all the features of prep- 
aration, including material, 

A word about the safeguarding of the standards. A single 
copy was selected as the true and original standard. In this 
case 6 sets had been prepared from identical cotton to be as 
nearly identical as possible. The original has been stored for 
safekeeping in a steel safe in the vaults of the United States 
Treasury. Another copy has been stored in one fire-proof 
building, while 3 other copies are stored in a fire-proof vault 
vault in still another fire-proof building; and finally, in order 
that during future years the standard may be kept true, 25 
sets have been placed in a vacuum in glass tubes, where they are 
subject neither to the influence of light nor air, so that they 



176 MARKETING AND FARM CREDITS 

can be opened fi*om time to time during the coming years for 
piirposes of oomparison and eorreotion of the working types. 

I have preferred to go into detiiil with reference to the work 
on cotton st^\ndards, which has actnally been accomplished, 
rather than to outline work which is going on biit iii an in- 
complete state with refei*enee to other products. 

Grades For Perishable Farm Products 

One section of the office of markets and rural organization 
is devoted exclusively to the work on grades and standards for 
fruits and vegetables, involving practically the whole time of 
about 5 men. During the past 18 months the major etfort 
has been devoted to potatoes, tomatoes, strawberries, canta- 
loupes and peaches. These crops, except potAtot^s, which were 
chosen because of their great importance as a staple food, 
were selected on account of the fact that during the past sea- 
son an experimental telegraphic market news service had been 
conducted with a view to determining the possibilities of such 
a service and the problems that must be successfully solved to 
make it v;iliuible. In the course of this work it was soon found 
that we must have a common language for quoting prices. In 
fact, it was practically a necessity to adopt a uniform termino- 
logy for gi'ades and packages before this telegraphic market 
news service work could be made of particular value. 

In the coui*se of this work, yon will be interested to know, 
reports on demand, receipts, prices, market conditions, etc., 
were received fi'om personal representatives or prominent lirms 
in about '20> of the largest markets in the United States. 
These were telegraphed each morning to the office in Wash- 
ington, where they were compiled and condensed and trans- 
mitted to the great producing sections for the particular crops 
included in the service. By night letter daily we secured from 
the great shipping areas reports as to carload movement and so 
far as possible the markets to which shipments were destined. 
This information was transmitted by telegraph to the repre- 
sentatives in the markets and was released by them. The rail- 
roads have cooperated most helpfully in this work. Those 
who participated in the experimental service during the sea- 
son have expressed themselves practically as a unit in favor of 
the continuation of the work and in commendation of its value. 
However, as I have previously stated, the ultimate good from 
work of this character can be realized only after standardiza- 



CHARLES J. BRAND 177 

tion has been brought to a much more perfect state than is now 
the case. 

The preparation of standard grades for grain is handled by 
Dr. Duval of the Bureau of Plant Industry, who, I believe, is 
to speak to you, so I will not discuss this phase of standardiza- 
tion. 

We are studying the question of hay grades, butter grades, 
grades for livestock and meats, and are also making prelimi- 
nary plans for work in the standardization of wool grades. 

A large corps of investigators, 25 or 30 in number, are en- 
gaged in the investigation, preparation and distribution of 
various standards for cotton, including grade, quality, color, 
length of staple, etc. 

There were before the Congress at its last session, 2 pro- 
posals for national standardization relating to cotton and 
grain, requiring all of these commodities that are sold by grade 
and moved in interstate commerce to be according to the grades 
established by the federal government under the respective 
laws. Both bills passed the House of Representatives but were 
not reached in the Senate by reason of adjournment. Con- 
gress has also passed 2 laws known as the standard barrel 
laws; one covers apples and the other fruits, vegetables and 
other commodities. The former has been in effect since the 
first day of July, 1913, and the latter goes into effect on the 
first day of July, 1916. The latter has an interest that will 
appeal to you, due to the fact that it is based on the authority 
conferred by the Constitution on the federal government to fix 
standards for weights and measures. It is the first exercise of 
this power in many years for any purpose and the first exer- 
cise of it whatsoever for the purpose of standardizing con- 
tainers for specific products. I think we may look to an en- 
larged use of this constitutional power in the future. 

Other wastes and losses aside, I think it is true that the 
greater the accuracy of the standards by which products are 
sold, the smaller the margin between the jjrice received by the 
producer and that paid by the consumer. This is equally true 
whether the product passes to the consumer in a non-manu- 
factured state or in the case of products that must first pass 
to the manufacturer to be worked into consuming condition. 

When standards are honestly applied, cotton for which the 
producer receives, say, 10 cents, rarely costs the spinner as 
much as 11 cents, which would in most cases be sufficient to 
include transportation. Indeed, in cases with which I am per- 

12— M. F. c. 



178 MARKETING AND FARM CREDITS 

soually familiar, -where cotton mills are located iu cotton-pro- 
ducing territory, the margins are very narrow. In one case I 
have in mind, the cotton merchant acts purely as a factor and 
bills the cotton to the mill at just 50 cents a bale over what he 
pays the producei*. This is only one-tenth of a cent per pound 
margin. 

In the case of properly graded wheat, Professor Weld foimd 
in Minnesota that 90 per cent of what the miller paid went to 
the producer. As transportation must be paid, the total spread 
is relatively small. 

Ill products difficult of standardization, or at present sold in 
ungraded fashion, it is not at all unusual for 50 per cent of the 
consumer's j^rice to go to the intermediaries who accept the 
risk of handling such a product. 

In passing, it is only fair that credit should be given to the 
various groups of intermediaries in the handling of farm prod- 
ucts, who have worked out useful systems of grades for uumy 
products. Among these may be mentioned The National Poul- 
try, Butter and Egg Association, The International Apple 
Shippers' Association, the National League of Commission 
Merchants, The Western Fruit Jobbers' Association, and many 
other organizations, including cooperative producers' societies. 

The press of the produce trade has also helped the good 
work. 

Though exceedingly useful, the standards that have been 
elaborated by the trade leave much room for progress and the 
basis of that progress must be laid at the farm or very near 
to it. Complete and intelligent standardization of farm prod- 
ucts for market involves : 

1. The planting of standard market varieties and the elimi- 
nation of many of the minor kinds now produced. 

2. The standardization of methods of production. 

3. Uniform methods of preparation for market. 

4. The applying of standard grades for determination of qual- 
ity. 

5. The use of standard packages and containers. 

Proper Gi-ading Reduces Wastes. 

It is in the long run almost suicidal for a producer or shipper 
to forward to the market ungi-aded products. To show you how 
great a voliuiie of ungraded fruit is sometimes shipped, I may 
sav that one of the investigators of the office of markets and rural 



CHARLES J. BRAND 179 

organization found on the Chicago market, based upon observa- 
tions made between September 15 and December 5, that approxi- 
mately 25 per cent of the carload bulk arrivals of apples, amount- 
ing to about 350 carloads, and about 10 per cent of the barrel 
shipments, equal to 160 carloads, v^ere so low in grade and quality 
that they would not have reimbursed the freight charges had 
this kind of fruit been received in straight carload quantities. 

The shipment of poor qualities and ungraded product is ruin- 
ous to the whole market, both the good fruit and the bad. The 
most rapid development in the adoption of uniform grades and 
packages of fruits has been made in the states of the "West where 
population is sparse and distances from market great, with high 
accompanying freight rates. Under these conditions the shipper 
can afford to send to market only those qualities that will com- 
mand high prices. Here, too, other economic factors have forced 
organization in both production and distribution, and organiza- 
tion is one of the foundation stones of progress in the preparation 
and use of market grades and standards. 

Not the least important of the questions of standardization are 
those that relate to the packages themselves in which commodities 
are transported or sold. In order to get an accurate idea of the 
diversity which prevails in this regard, Mr. More, who is in im- 
mediate charge of the work in grades and standards for fruits 
and vegetables, has made a collection showing the sizes and types 
of packages and containers current in the trade. I assure you 
it is a motley horde, and it is in itself a complete argument for 
standardization. No consumer could ever hope to know what he 
is getting in quantity in buying grapes. New York has one set 
of grape baskets, Michigan another, and still other grape terri- 
tories other kinds. Some of them look very much like others, but 
contain less. Such confusion furnishes endless opportunity for 
manipulation and even dishonesty. In the case of strawberry 
boxes, not only is there exceedingly great variation in the cubic 
contents, but it is a common practice to repack from containers 
of greater capacity to those of less in distributing in and to the 
retail trade. Likewise, with peaches, the successful commercial 
orchardist packs his peaches in the 2-1, 2-2, and 3-2 packs accord- 
ing to the size of the fruit, particularly in the popular and gen- 
erally-used Georgia carrier baskets, and often when he buys his 
own fruit he finds that where he had packed as high as 36 to 45 
in each of the 4-quart baskets, the retailer has repacked them so 
that he will buy from 19 to 25 peaches in the same basket. 



ISO MARKETING AND FARM CREDITS 



Standardization Proper Subject for Federal Leg:islation. 

Staiidai\liza.tioii of eoutaiuei's is a pix)per subjoot for federal 
le^slatioii under the wei^lits and measures power of tJie constitu- 
tion. As noted bet'ove. Congress has recently used this power iu 
establishing: the standard barrel for apples, eranlvrries and cer- 
tain other fruits and vegetables. By Airtue of tliis legislation 
the containers covei*ed by what is commonly known as the Tnttle 
bill became standards of measure with the Siuvie force and legal 
effect as the bushel. This act applies to intrastate as well as iu- 
tei*state commerce. Undoubtedly this barivl will i*eplace a large 
number of sliort measure packages which are \ised for potatot^s. 
truck crops, fi'uit and other things, and which vary in capacity 
from 2 bushels up to 10 or 11 pecks. The standardization of 
apple boxes, berry cratos and cups, and other containers is \m- 
der consideration, and we may look forAvard to progress with inf- 
erence to these. In some cases, even in the same state, there are 
dual standards applicable to the same products. In New York 
thei*e are 2 sets of standard grape baskets. Legislation has 
been placed on the books in a number of states, and is inider con- 
sideration in othei-s, particularly New York. ]Maine. Massi\chu- 
setts. Connecticut, Vermont and some of the "Western States which 
will tend to uniform trading in niuuei'ous pi\)ducts. 

The opportunities for standardization of grades and their ap- 
plication to products is givatest under conditions of oi'ganized 
pi\">duetion. Recipnxnilly. like"wise. the possession of standanls 
and gi-ades yields through better nuirket returns, the best divi- 
dends upon organization. The department of agricultuiv is 
Avorking earnestly upon many of the problems related to grades 
luid standards, and Avill Avelcome suggestions aJid assistance fivm 
producers, sliippei-s and others that Avill lead to further improve- 
ment along these lines. 



J. B. McCREADY Igl 



STANDARDIZATION AND COOPERATIVE 
MARKETING OF CHEESE 

J. B. McCready 
Manager, Sheboygan County Cheese Federation 

The method of organization, and the history of what led up 
to the forming of our federation was presented to you at your 
conference last year by our president, Mr. Krumrey, therefore it 
is needless for me to speak along those lines. Suffice it to say 
that we are now ihandling in the neighborhood of 7 million 
pounds of cheese annually, and are doing so <to advantage and 
at a profit to our farmers, who are the real producers of the 
cheese, if not the actual manufacturers of it. 

Nineteen hundred and fourteen, our first year in business, 
was a hard up-hill fight, owing to the opposition of some of our 
cheese makers who were annoyed at our farmers for taking the 
selling of the cheese and (the figuring of the dividends and the 
payment for the milk out of their hands. We also had the op- 
position of all of the regular wholesale cheese dealers, who looked 
upon us as a menace to the old established order of things, and 
even the opposition in almost every one of our 45 factories of 
a few short-sighted farmers, who could not see far enough into 
the future to be convinced that when once established, our 
federation was bound to be a benefit to all. 

What the First Year's Fight Won 

Looking back on the year 1914, I can see quite clearly the fol- 
lowing results: 

1. If not very important at least quite noticeable, a great many 
additional gray hairs in a head that was once quite noted for 
its shock of red — commonly called auburn. 

2. Less opposition from the cheese makers, who in the ma- 
jority of cases realize that they are getting a square deal, and 
are receiving all that they are entitled to — namely, the price 
agreed upon for the manufacture of dheese. 

3. Less opposition from the cheese dealers, who now recog- 
nize in us legitimate competitors. 



182 MARKETING AND FARM CREDITS 

4. A friendly feeling on the part of those fanners who were 
at first ajitagonistie to this federation They realize it is a good 
thing that the figuring and paying of their money is now in their 
own hands, and also that we are interested in getting the highest 
possible price for their product — that we stand as a barrier be- 
tween the local dairv^ boards of trade and the buyer to prevent 
the arbitrary fixing of board prices. 

In fact, we have been a benefit to the farmers outside of our 
organization as well as to those who belong, inasmuch as we do 
cut enough figure to make it impossible for the dealers to drop 
prices unreasonably low during the season of greatest production, 
at the time w^hen the dealers are storing large quantities of cheese 
for winter use. The fact that we have benefited all has been 
brought to my notice several times in conversation A^-ith some of 
our own federation farmers when they have told me of farmers 
outside of the federation who have always advised them to be 
sure to stick and to keep up the work of the federation, so even 
those on the outside can see the benefits and indirectly share in 
them, but unfortunately, as is often the case, they are perfectly 
"\villing to enjoy these benefits and 'let George do it' 

In 1914, despite all opposition, we went along and met legiti- 
mate competition and paid our patrons in most cases as good 
price as factories outside of the federation, and at the end of 
the season we had a profit of about $5,000 to be divided, but our 
members wisely voted this as a nucleus for a reserve fund. This 
year things have rim along more smoothly, and we have enjoyed 
a good and growing business, and I can safely say that we have 
in most cases paid more than our competitors. In addition to 
this, I am positive that we shall have 2, if not 3 times, as great a 
surplus to divide as we did last year. 

I might say we confine the selling of our output entirely 
to the regular jobbing trade, namely, wholesale grocers, jobbers, 
■and commission merchants. 

We charge one-fourth cents per pound for handling cheese, 
which includes all necessary warehouse and office expense, 
freight, drayage, taxes, insurance, telegrams, postage, stationery, 
and all other expenses connected with the business. Last year 
Ihis one-fourth cents barely covered all of our expenses, as our 
•expense of organization was quite heavy before we were in a po- 
sition to handle cheese at all. Therefore we had considerable 
expense before we had any earning capacity. This year I be- 



J. B. McCREADY 183 

lieve I am safe in saying that one-fourth cent per pound will 
cover all necessary expenses. 

Now, in regard to standardization and packs of "Wisconsin 
cheese, shall say that our cheese are all put up and packed in 
the regular Wisconsin sizes and packages that have been used 
in the cheese business for a number of years. The cheese are all 
of one variety, namely, cheddar, or so-called American cheese. 
The only difference in the following named cheese is in the style 
or shape, on which the prices vary considerably owing to supply 
and demand. The following are the different styles as handled 
by us: 

Twins (2 in a box) about 65 pounds average. 

Singles ( 1 in a box) about 33 pounds average. 

Daisies (1 in a box) about 21 pounds average. 

Twin Daisies (2 in a box) about 43 pounds average. 

Longhorns (4 in a box) about 50 pounds average. 

Twin Longhorns (2 in a box) about 25 pounds average. 

Single Longhorns (1 in a box) about 121/^ pounds average. 

Young Americas (4 in a box) about 44 pounds average. 

Square Prints (2 in a box) about 20 pounds average. 

Standardization Big- Need in Cheese Industry 

Standardization — this is the big problem before the cheese 
interests today. There are millions of pounds of good cheese 
made in Wisconsin annually, yet sad to relate there are also a 
great many pounds of poor cheese made, and there will be until 
we have a considerably closer system of grading for quality. 

We grade all cheese on their arrival at our warehouse, putting 
out only the best under our brand, and selling the undergrades 
at a lower price and for what they really are. Whenever one 
of our factory men has undergrade cheese we write him, giving 
him the date on which they were made, calling his attention to 
the defect, and suggesting a remedy whenever it is possible to 
do so. I believe by doing this we have materially improved the 
quality of our cheese this year over last. In fact, our loss on 
quality this year has been much less than it Was up to this time 
last year. 

While it is true that this season has been much more favor- 
able for making good cheese than last, owing to the abundant 
rains and cool nights of this season, yet I believe that the plan 
of advising cheese-makers of their shortcomings and recom- 
mending changes has been of material benefit. Also, I can see 



184 MARKETING AND FARM CREDITS 

that our cheese makers this year have been more open to sug- 
gestion. A friendlier feeling exists and there are more signs 
of a willingness to cooperate. 

In grading cheese we try if possible by seeing them to find 
where the fault lies. If the cheese maker is to blame the loss is 
paid by him If the farmers are to blame they stand the loss, 
and rightfully so. The cheese makers are not always to blame 
for all of the poor cheese. I believe that of 65 per cent of the 
poor cheese made the fault can be laid at the door of the farmer 
who is careless and does not take proper care of the milk before 
delivering to the factory. There are very few cheese makers 
who can make good cheese from poor raw material to begin "with. 

I hope to see the standard of our cheese raised and I believe 
we are getting along towards the goal, slowly perhaps but surely, 
and we shall progress faster than we have when we become better 
established and stronger — when we can offer to pay the factory 
men making fancy cheese a premium over the man who just insists 
on making a passable cheese. This premium should be in the 
form of a bonus or prize to the cheese maker for his ability and 
extra labor in producing nothing but the best. Under existing 
conditions there are cheese makers wlho can make a better cheese 
than they do, but are satisfied to go along making a cheese just 
good enough to pass the buyer because they are all paid the 
market price for passable, or so-called marketable, cheese and 
docked for undergrades, so they are only interested in not having 
undergrades and not interested in 'having fancy cheese. 

We have a standard of perfection in cheese as in all other 
things. Some of our cheese makers reach this standard and on the 
average stay mighty close to it all season, but there are a great 
many who do not even get close. When we become financially 
and cooperatively strong enough to pay extra for extra quality, I 
hope and believe every one of our factory men will reach this 
standard. If he does not I am afraid he will have to make room 
for a better man. 



C. E. LEE I8f 



HOW TO STANDARDIZE THE QUALITY 
OF BUTTER* 

C. E. Lee 
College of Agriculture, University of Wisconsin 

Good butter is always in demand by both the commission 
trade and the consumer. It can be made in any dairy section 
providing everything possible is done to deliver to the cream- 
eries, good clean flavored milk and cream, and every possible 
precaution is taken to manufacture an article that is perfect 
in workmanship and neatly packed when presented to the 
consumer. Market quotations represent the price that is being 
paid for butter of highest quality. The buttermaker, the one 
person that stands between the producer and the buyer, pre- 
fers to make nothing but a fancy article. 

The average factory operator has been trained to make but- 
ter that is perfect in workmanship, namely the body, color and 
salt of the butter is faultless. Therefore, whenever the butter 
presented upon the market is lacking, tainted in flavor, and 
aroma, the blame in a large measure can be placed upon the 
community where the milk and the cream were produced. 

The men that have made a close study of the quality of the 
butter handled by the commission men or furnished directly to 
the consumer by the manufacturer realize that there must be 
a united efi'ort for an improvement in quality. 

The result of the study of Wisconsin butter as made during 
the past 6 years and entered at the exhibitions conducted by 
the department of dairy husbandry, college of agriculture, Uni- 
versity of Wisconsin, strongly emphasizes the relation of the 
quality of the raw material to the flavor found in the finished 
product. 

In 1910 some 9 per cent of the butter exhibited was made in 
factories that received nothing but whole milk delivered daily 
in summer and from 3 to 4 times per week in winter, with an 
average score of 93.68 on their butter; for the following year 
12.7 per cent of butter, with an average score of 94.03 and for 
1912 13 per cent of the butter was made from whole milk with an 
average score of 94.35. For the same period the per cent of 



♦Delivered before the second National Conference on Marketing 
and Farm Credits at Chicago, in April, 1914, in joint program with 
the Western Economic Society. 



186 MARKETING AND FARM CREDITS 

butter that was made from cream that was skimmed on the 
farm and deliverey to the factories by the producer or haulef s 
increased from 45.5 per cent in 1910 to 59.3 per cent in 1912. 
The average score placed on the 571 monthly exhibits in 1912, 
made from cream skiimned on the fann was 92.23. This is 
over 2 points lower than the score placed on the whole milk 
butter for the same period. 

Not a single month for that year was the average score 
placed on butter made from cream skimmed on the farm above 
92.4, while the average score placed on the whole milk butter 
exceeded the 94 mark for every months but one. 

Character of the Creamery Industry Has Changed 

During the past 10 years there has been a marked change 
in the character of the creamery industry. The closing of the 
skimming stations and the discontinuing of making butter in 
creameries receiving whole milk has been brought about because 
the farmer preferred to skim the milk. This was the natural 
result of progress and a compliance with the wish of the dairy- 
men who advanced the following arguments. 

1. The skimming of the milk on the farm would result in a 
higher grade of skim milk for feeding purposes. 

2. A reduction of the danger of the introduction of can- 
tagious diseases into the herd. 

3. Time saved in hauling milk to the factory. 

4. Less produce to be cared for at the farm. 

5. A less restricted market. 

"When the creamery industry accepted the above arguments 
little did they expect that it would lower the quality of the but- 
ter. The system of making butter from cream skimmed on 
the farm has passed the experimental stage and it is definitely 
known that high grade butter cannot be made from the butter 
fat in tainted cream. 

Cream Producers Will Cooperate 

The average dairy farmer when once told that his product 
must be improved will adopt better methods. The few that 
do not heed such advice and whose product is still being ac- 
cepted by the creamery company means a loss to all producers, 
because it is impossible to cover up the defects found in one 
can of cream by mixing it witli 9 cans of clean flavored prod- 



C. E. LEE 187 

uct. The reason that one farmer does not produce cream 
that is equal to that sold by his neighbors is because he does 
not follow the simple rules of cleanliness. 

The farmers may be interested primarily in producing but- 
ter fat at a low cost, but this is no excuse for neglecting to 
give due consideration to the factors that will bear a relation 
to the future of the industry. Competition, foreign or other- 
wise, can be successfully met by making butter of highest 
quality. 

The cream producers can say whether or not the butter made 
from cream skimmed on the farm shall have the quality found 
in butter made in factories that received whole milk only. 

Their success in doing this is measured by the extent to 
which the following rules are observed : 

1. The dairy barns are whitewashed twice a year. 

2. The barn is always clean and well ventilated. 

3. An abundance of bedding is used in the cowstalls. 

4. The cows are not fed on foodstuffs that are liable to taint 
the milk. 

5. The separator is operated in a clean well kept milk house. 

6. The cream is cooled as soon as possible after it is pro- 
duced to a temperature very closed to 50 degrees. 

7. The separator and all dairy utensils are cleaned and thor- 
oughly rinsed with boiling water after each milking. 

8. All of the cream produced is delivered to the factory at 
least 4 times per week in summer and 3 times during the cold 
iveather. 

Cooperation Has Improved the Quality of Butter 

In several localities in Wisconsin there has been a marked 
improvement in the quality of the butter. In a very large 
measure this has been accomplished by a united effort on the 
part of the farmers to produce milk and cream free from ob- 
jectionable taints. This improvement has not taken place in 
isolated plants, but in groups of factories handling all of the 
cream produced in certain localities. This can be illustrated 
by a community in Northern Wisconsin where 3 cooperative 
creameries handle all the butter fat produced within a reason- 
able distance. The operator of one of these plants entered 
butter at Madison when the exhibition work was started in 
May, 1907. The average score on the first 15 exhibits being 
91.2, the mighest 93 and the lowest score 88.8. This butter- 



188 MARKETING AND FARM CREDITS 

maker resigned to make place for another man, and took ehargo 
of the neighhormg factory. He conthiued as an exhibitor at 
Madison, receiving a score of 92.i> on his tirst 1*J exhibits and 
93.r> on the following 12 that represented his second year's 
work at this factory, and the same average score on the next 
10 lots of bntter. Since each tub repivsented 1 month's 
■work the bnter from this factory for IS ont of the last 22 con- 
secntive months was sut^ciently high in quality to meet the 
highest market requirement. The man who took charge of the 
factory tirst referred to received a score of less than 93 on 11 
out of his tirst 17 tubs of butter with an average score of 
93.9 for the 12 tubs entered from May, 1912, to April, 1913, be- 
sides making the tub of butter that was given 1 of the 5 
state prizes awarded* at the annual convention last February. 
The man in charge of the third factory has made butter that 
for 2-t consecutive months has received an average score of 94.6. 
The highest score being 97 and the lowest 93.16 on the fii'st tub 
entered. 

The butter nuide by these 3 men is a credit to the dairy 
industry of that locality Avhere formerly a second grade butter 
was made. 

Others have made rapid progress by educating the farmers 
in better methods. An increase in quality from 92.66 to 95.S3 
on butter representing 11 ditferent mouths is the record of one 
factory. The average score being 92.69 on the fii'st 6 exhibits 
and 94.51 on the last 5. Another factory in 6 Tuonths increased 
the quality from 90.83 to 95.33. 

The butter from 1 factory at the outset scoi*ed 93.66 and 
on the last 7 out of the IS months the score varied between 
95.16 and 96.25. The following illustration represents 1 fac- 
tory 's output for 4 years : 

The average score on 12 exhibits made May, 1909, to April, 
1910, was 93.97 ; for 1910 to 1911, 94.42 ; for 1911 to 1912, 94.66; 
and for 12 mouths. May, 1912, to April, 1913, an average score 
of 95.12. 

It is further known that the highest grade of butter now be- 
ing produced regardless of the kind of raw material that is 
received comes from territories where the following factors be- 
ing observed. 

1. Every milk and cream producer is interested in the wel- 
fare of the local factory. 

2. The income from the dairy receives first consideration, in 



C. K. lilOl*] ]^() 

otluM- words (Ijiiryiii^ is not n .side issiKi in J'lirin opciraiions. 

;{. A \nrii;{\ miiidx'r ol' the farmers have u suitable place for 
eooliiifi: mid storiiijij IIk^ eroain. 

4, The iivenifjce jxt vvut ol" rut in tlui eroam delivered ranges 
between ;>() .-md 10 |)er cent. 

f). All of llie creiiin prodiiced on the vjirious rnnns is d(div- 
ored at stated, rej^nhu- Jind Treipient irdn^'vuls. 

G. 11' the cream is coileeted by haulers the routes are not 
lonj? and a sullleiently number oi' trips are nuide each week 
to insure cream of j^ood (pudity. 

7. (1rean» i-outes are iu)t eslablishcid in the territory that 
rifj^htfuily beloufjjs to llui ru'if^hboi'in^ creamery. 

8. Quality nitluM- thnn cpiantity of butter receives first con- 
sideratioti. 

}). I'erl'iHit (H)operation between the factory owner or mau- 
ajjjer and the buiter maker with reference to the importance of 
receivinji: nothing but good cream. 

10. It is imi)()sil)Ui to nuike good butter from tainted raw 
material. 

Where Improvements Must Be Made 

in n(>arly twery coimnunity u remarkable im[)rovenuMit can 
be brousi'ld about by a u?iited elVort in i)rodueing erciun con- 
taining be(\ve(Mi :U) iind 10 per cent butter I'at. This will result 
in a higher grade of butter being produced and a greater re- 
turn from Die d.iiiy. Among llu> ii(ivanl^ig(>s ni'c^: 

The ricluM- ci-e;im has a greater keeping cpuility; more skim 
milk is lol't at the farm for feeding purposes; there is less to 
ti'arisport; the cost of factory operations is decreased, and per- 
luils of i)asteuri/a(ion and the liberal use of a starter so essential 
in modern buttcr-nuUcing. 

The patrons of one eoiiperative factory in Wisconsin for the 
year li)l;i lost approxinvately t|>4,600 by producing cream test- 
ing nearly 'J;i per cent instead of HO per C(>nt. because the 
richer cream was not skiuniied, nearly 800,000 pounds of skim 
milk was hauled away from the farm. Its feeding value eoiild 
safely he estimated at 25 cents per 100 pounds. The cost of 
hauling tlie cream fi'om tlie farm to the factory was \]6 cents 
per hundred besides an increased los« of butter fat; and in- 
creased cost of factory operations. The loss in the quality of 
the butter could not be determined, but it is safe to assume that 
no suuill sum was lost. 



190 MARKETING AND FARM CREDITS 

At the close of a recent meeting of the patrons of a coopera- 
tive factory where this subject was thoroughly discussed, sev- 
eral of the dairymen present agreed to skim cream to the de- 
sired richness and to do everything within their power to im- 
prove the quality of the cream. 

Farmers that are interested in cooperative creameries can do 
a great deal of good in improving the present system of collect- 
ing the cream. At present the best grade of cream in a large 
measure is being produced by the farmers that deliver their 
own product to the factory because they have a better op- 
portunity of getting in personal contact with the butter-maker. 

The next best system is where several farmers agreed to in 
turn deliver the product from all the farms. 

The cream hauling system as is now practised in several lo- 
calities is not conducive to the quality of the butter. The 
cream routes should not extend beyond the local territory nor 
should they be of such length that the first lot of cream col- 
lected at 7 a. m. is not delivered until late in the afternoon. 

All of the cream should be at the factory by noon in order 
that the butter maker may have a fair chance to handle the 
cream properly. 

Butter For Storage Must Be Improved 

There must be a united effort to improve the quality of the 
butter produced not only during the winter months, but dur- 
ing the summer months as well. In Wisconsin, fully one-fourth 
of the annual output of butter is made during the months of May 
and Jiuie and nearly one-half for the 4 months, May to Septem- 
ber 1st. Therefore the surplus of these months must be placed 
in storage until the season of shortage. Unless the butter placed 
in storage is of high quality it is impossible to expect that stor- 
age butter offered for sale during the winter months will be able 
to hold its ovra. in competition -with imported butters made in 
counries where the seasons are the reverse. 

The farmers can and will come to the rescue of the quality 
of the butter in order that dairying will continue to be a 
profitable industry. 



DR. J. W. T. DUVAL 191 



ACCEPTABLE STANDARDS IN GRAIN 

Dr. J. W. T. Duval 

Crop Technologist in Charge of Grain Standardization Inyestigations, 
U. S. Department of Agriculture 

It affords me pleasure to discuss with you this afternoon the 
question of acceptable standards in grain. The grain business, 
in all of its phases, has assumed such immense proportions, that 
the demand for standard grades, that can be uniformly applied, 
has become almost universal. Acceptable standards must em- 
body some definite description of the more important factors 
taken into consideration in the grading of grain. 

These standards must be such that the producers,. the dealers, 
the consumers and all interested parties may know "the length 
of the yard stick ' ' by which the grade of the grain in which they 
are interested is to be measured. It is also essential that this 
measure be uniform and definite ; the same in Chicago, New York, 
St. Louis and New Orleans ; that it be applied on poor crops as 
well as on good ; that it be used in the same way from July 1 to 
June 30 ; and that it cover the export as well as the domestic trade. 
With grades a fluctuating proposition, varying in different mar- 
kets, and even in the same market at different seasons and under 
different conditions, the producer has no means of knowing when 
he is receiving the grade or the price to which he is entitled. 
Neither is the country elevator operator, who should have a thor- 
ough knowledge of the commercial grades, in a position to buy 
grain on its merits. Under a fluctuating system of grading, he 
is obliged to buy on the basis of average quality, leaving ample 
margin to fully protect himself against variability in grading at 
different points, and this margin must eventually come mainly 
from the producer, and especially from the producer of grain of 
high quality. 

Strong efforts are now being put forth in the movement for the 
production of more grain of better quality. If a farmer is to 
grow grain of high grade it is essential that he know the grade re- 
quirements, which he cannot do unless they are something definite 
and staple. Under a uniform system of grading, with the grades 
clearly defined, there is every reason to believe that that farmers 



192 MARKETING AND FARM CREDITS 

will meet the requirements; but uot until the good grain com- 
mands the premium to which it is entitled. 

Basis for Standard Grades 

In fixing the standard grades for corn, whieli have been in ef- 
fect since July 1, 1914, it was the aim to provide definite limits 
for the more important factors wliich determine the quality and 
condition of any given lot of corn. The limits for color, moisture 
content, damaged kernels, foreign material, and cracked corn 
were definitely fixed in so far as it was possible to do so. 

In the fixing of grades for wheat, oats and the other grains, it is 
probable that the same general plan vnll be followed, with such 
modifications as the particular kind of grain may require. 

Moisture Content 

So much has been said at one time or another concerning the 
moisture content in grain that it would hardly seem necessary to 
discuss this factor to any extent. However, no discussion of 
standard grades would be complete if no mention were made 
of this. Perhaps the most important factor, is that, upon the 
degree of dryness, more than anything else, depends the keep- 
ing quality of grain in storage or during transit. This fact 
has been so strongly emphasized during the present season 
with a considerable percentage of our winter wheat and more 
than half of our oats badly damaged as a result of excessive 
moisture, that all must agree that no standard grades would be 
acceptable without a definite requirement as to moisture con- 
tent. The terms dry, reasonably dry, damp, wet, etc., are in- 
adequate. They leave too much room for a shifting of grade 
values. Grain that is dry to the seller is often damp or wet 
to the buyer. Perhaps never in our history has this been more 
strongly emphasized than with our present crop of wheat, and 
especially much of that which has been going for export. I 
shall not discuss the export situation in detail, but the matter 
is of such vast importance to our trade relations with foreign 
countries that duty demands that I present here a few facts 
with reference to some of our wheat that has been exported 
under a certificate of No. 2. It will be sufiicient to caU your 
attention to our analyses of samples from one lot or more than 
70,000 bushels certificated as No. 2 hard winter. This lot of 
wheat showed a moisture content ranging from 13.7 per cent 



DR. J. W. T. DUVAL 193 

to 16.5 per cent with an average of 15.1 per cent, under a pub- 
lished rule which provides that No. 2 hard winter w^heat shall 
be dry. It is not surprising that complaints are coming in 
from grain exchanges and American consuls in European coun- 
tries to the effect that wheat from the United States is arriv- 
ing in a heated, musty, and damaged condition. Neither is it 
surprising that a considerable portion of the great surplus of 
Canada's most excellent crop has been commandeered for use 
in Europe during a period when they have no time to barter in 
grain that arrives in bad condition. Wheat with 15.1 per cent 
moisture is in no sense dry, and it is practically as certain to 
go out of condition before it can be discharged at a European 
port as anything can be. Neither is such wheat entitled to a 
grade of No. 2, although it might possibly be squeezed into a 
No. 4. With a definite limit of moisture for the different 
grades such elasticity would be impossible. 

What the limits should be in standard grades I am not able 
to express, but based on the data now available, a maximum 
of 13 per cent is probably not far from correct for No. 2 win- 
ter wheat. Most of the corn grades cover a range in moisture 
content of 2 per cent, but with the small grains the range must 
be more restricted. Oats under normal conditions will carry 
less moisture than wheat. At present indications it does not 
appear that oats with a moisture content in excess of 12 per 
cent or at most 12.5 per cent should be permitted in a grade 
above No. 3 under the present classification, and that oats 
having a moisture content in excess of 14 per cent should right- 
fully be classified as sample. 

Foreign Material 

With respect to the amount of foreign material such as 
weed seeds, chaff, dirt, etc., standard grades should be more 
definite than under exisiting conditions. By way of illustra- 
tion, take the grades for wheat. Aside from the "dockage** 
system applied in a few markets to the grading of spring 
wheat, most grade rules provide that the wheat shall be clean 
or reasonably clean. What these last two terms mean I have 
never been able to accurately determine. I have my own ideas 
as to what should be classed as clean wheat, but it would seem 
that they do not correspond to the ideas of others, if inspection 
certificates serve in any measure as a basis for comparison. 
Investigations have shown that grades of wheat, under rules 

13— M. F. C. 



194 MARKETING AND FARM CREDITS 

specifying it "must be clean" show on actual analyses, weed 
seeds, chaff, dirt, etc. varying from a mere trace to 3 or 4 per 
cent. The terms "clean" or even "reasonably clean" must 
surely mean something more definite than that. Webster de- 
fines clean as being "free from dirt, filth, impurity, foreign or 
"undesirable matter." In rules for grades clean must neces- 
sarily mean something different, for no commercial grain is 
absolutely free from foreign matter, and no reasonable person 
would so contend. In many markets there is an unwritten 
rule that wheat with less than one-half per cent of foreign ma- 
terial shall be considered as clean. If this is a fair and rea- 
sonable interpretation, then it should be written into the rule 
so that all might know ; it is just as important to the man who 
is growing it, the country elevator man who is shipping it, or 
the man Avho is buying it, as it is to the inspector who does the 
grading. Equally indefinite is the phrase "not clean enough 
for No. 2." Rules governing foreign material in standard 
grades to be acceptable must be more clearly defined. They 
should either clearly indicate in terms of per cent the quan- 
tity of such material permissible in any given grade, or they 
should be based on a "dockage" system, such as is now ap- 
plied to spring wheat in some of the large markets. As I have 
publicly stated on previous occasions, the more I study the 
dockage system the better I like it. It affords an opportunity 
for more uniform grading in that it is not always easy to 
judge as to the quality of a given lot of grain carrying a con- 
siderable quantity of foreign material. Moreover, the pro- 
ducer or country shipper can determine such dockage in ad- 
vance of sale or shipment if he cares to do so, and can likewise 
remove such dockage if he finds it profitable to install the nec- 
essary cleaning machinery for that purpose. Ordinarily, 
cleaning can be done more economically at the elevator than 
on the farm. In some sections, especially in parts of Indiana 
and Michigan, a very commendable practice prevails in the 
cleaning of wheat as delivered at the mill or country elevator,^ 
the screenings being returned to the farmer. 

Inseparable Impurities 

A strictly dockage system, however, is not fully applicable 
in all cases. Such impurities as corn cockle, garlic, kinghead, 
etc., that cannot be satisfactorily removed from wheat by 
means of the cleaning machinery in common use, must, under 



DR. J. W. T. DUVAL 195 

any system of grading, be given special consideration in that 
they seriously affect the milling value of the wheat even when 
present in small quantities. In addition to the assessed dock- 
age there should be a lowering of grade or a discount in price 
to compensate the miller for the extra expense in putting such 
wheat into suitable condition for milling. Moreover, the re- 
moval of such impurities by special cleaning machinery is ac- 
companied by a heavy loss of wheat. This can be more clearly 
expressed by referring to the analyses of a few representative 
samples of corn cockle screenings secured at country mills. 
The average of four lots of screenings showed 12.1 per cent 
com cockle, 11.1 per cent of other weed seeds and grains and 
76.8 per cent of wheat. In a bulletin now on press, — Bulletin 
No. 328, — the effects of some of the more troublesome impuri- 
ties on the milling value of wheat are fully described. 

Mixtures of Varieties, Classes, and Kinds of Grain 

Closely allied with the so-called inseparable impurities are 
the mixtures of different varieties, classes, and kinds of grain. 
Rye often grows with wheat, sometimes as a volunteer, but 
more frequently as a result of impure seed, and occasionally 
rye is deliberately mixed with wheat, usually hard winter, for 
illegitimate profits. Millers all agree that rye in wheat in-^ 
jures the color of the flour, however not all agree as to the 
quantity of rye that wheat will carry without showing such 
injury. Our investigations have shown that the presence of 
rye in as small quantities as 3 per cent injures both the color 
and the texture of the bread, and that as little as 1 per cent 
is noticeable on color. It would therefore appear from the 
data now available that the maximum percentage of rye per- 
missible in grades of wheat should not exceed 1 per cent. A 
somewhat similar case is the mixture of Durum wheat with 
the other hard spring wheats. Within the past year, samples . 
from three different cargoes of wheat, certificated as No. 1 
Durum, contained an average of 16.4 per cent of other spring 
wheats, and 4 per cent of weed seeds and other foreign ma- 
terial. It does not necessarily follow that the spring wheat 
was deliberately added even though the difference in price at 
that time would have made such a substitution highly profit- 
able. In fact, our investigations have shown that a consider- 
able percentage of Durum wheat is mixed with bluestem, velvet 
chaff, etc. when it eomies from the field. During the past 



1'9B MARKETING AND FARM CREDITS 

Iharvest, head counts in 110 fields of Durum wheat showed that 
13.2 per cent of the heads were of spring wheats other than 
Durum. Less than 8 per cent of the fields showed pure Durum 
and only 27 fields out of a total of 110 contained 95 per cent 
or better of Durum heads. But whatever these conditions, it 
requires a considerable stretch of the imagination to figure out 
on what grounds a grade of No. 1 Durum could be given to a 
lot of wheat which contained 16.4 per cent of other spring 
wheats, and 4 per cent of Aveed seeds and other foreign ma- 
terial under a rule reading "shall be * * * Avell cleaned 
••^and be composed of Dunim * * * wheat.'"' I am certain 
'thsbt under standards acceptable to the IT. S. Department of 
Agriculture No. 1 Durum wheat will not be allowed to carry 
^such percentages of other wheats and foreign material. I 
mention this more particularly at this time in the hopes of 
•starting some movement for securing pure Durum wheat for 
.seeding next spring. Should grades be established before the 
anavement of another crop, it is evident that much of the wheat 
now sold as Durum would be classed as "mixed wheat./^ 

Damag^ed Grain 

Damaged grain offers perhaps the most serious difficult}^ in 

formulating acceptable standard grades. There are so many 

d'^rees and kinds of damage that an arbitrary line must be 

drawn as to what shall be classed as commercially sound and 

what shall be considered as damage. Many forms of damage 

'"however are partially covered by the weight per measured 

"bushel. But even this factor must be determined with con- 

■ siderable care and according to certain prescribed methods if 

the results "are to be at all reliable. It is easy to make a dif- 

: ferenee in weight of one or two pounds depending on li&w the 

ttest ifcettle is filled. 

I[ sTiall not undertake to discuss grade requirements for 
{rosled, sprouted, immature, blighted, rust damage, etc., for 
these are factors dependent largely on weather conditions over 
which the farmer has no control. I wish to emphasize, how- 
'ever, the stinking smut which may be present in wheat as smut 
iDalls, or as a mass of smut spores adhering to the brush of the 
kernel. In extreme cases the somewhat oily spores are pres- 
ent in such countless millions as to cover the entire kernel. 
This can be better understood when it is considered that a 
single smut ball is estimated to contain 3 million spores. 



DR. J. W. T. DUVAL 19X 

A few smut balls or spores impart a smutty odor to tlie wheat, 
and whenever this odor is distinct the wheat in my opinion 
should be classed as sample grade and discounted acQordingly. 
It requires a special washing treatment to make smutty wheat 
suitable for milling, and many of the small mills do not have 
such facilities. There is another reason for taking somewhat 
drastic action against smutty wheat in that this stinking smut 
yields readily under proper seed treatment. There is every 
reason to believe that within 5, or at most 10 years, stinking^ 
smut could be practically eradicated from the United States, 
if one of the treatments that have been recommended for so 
many years by the federal department of agriculture and the 
various state agricultural colleges and experiment stations 
were universally applied with proper care. 

When Will Standard Grades for the Small Grains be Fixed? 

With the corn grades now being applied to the second crop 
you are naturally interested to know when the department 
contemiplates the fixing of standards for the small grains. I 
regret that this is a question to which I cannot give you definite 
reply. As you are aware, our grain standardization investi- 
gations have not been limited wholly to the fixing of stand- 
ards, although much of the work done has furnished data 
that will serve admirably as a sound basis for such standards. 
The investigations have covered the harvesting and storing of 
grain on the farm ; the handling, storing, and grading of grain 
at country elevators and in the primary markets; the deterio- 
ration of grain during transit in cars and in transatlantic 
steamships; the milling value of different classes and grades 
of wheat ; the quality and condition of Argentine com imported 
into the U. S. — and various other problems covering every im- 
portant phase of the handling, storing, grading and transporta- 
tion of grain. Moreover, the mere fixing of grades and their 
adoption accomplishes but little in the absence of suitable au- 
thority to control their application. It is therefore only fair to 
state that personally I am strongly opposed to the fixing of stand- 
ard grades for additional grains until after the enactment of 
sudh legislation that will provide authority to insure uniformity 
of application, because without such legislation uniformity is 
impossible. 

As to what form such legislation should take, there is appar- 
ently an honest difference of opinion. Some prefer out-and-out 



198 MARKETING AND FARM CREDITS 

federal inspection, while others believe that federal supervision 
will meet every requirement. Personally I stand committed to 
federal supervision, because I believe that it will afford every 
needed protection to the producers and consumers of grain, with 
the least possible disturbance of legitimate practices in the 
handling of our great crops of grain, and ^^ith a minimum ex- 
penditure of public money. Moreover, even with federal in- 
spection, it would be necessary to have a system of supervision, 
for without supervision it would be impossible to maintain uni- 
formity of application. 

Proposed Federal Legislation 

While it is not my function to discuss proposed legislation, it 
might not be out of place to summarize briefly the essential 
points of the grain grades bill, which, according to Congressman 
Ealph W. Moss, in a statement before the Grain Dealers' Na- 
tional Association at Peoria, will be reintroduced at the coming 
session of Congress. This bill provides the fixing of standard 
grades by the secretary of agriculture ; the licensing of inspectors 
for the grading of grain entering interstate or foreign commerce, 
and the revocation of such license in case of failure to grade 
grain correctly in accordance ^^dth the rules and regulations laid 
down by the secretary ; an appeal to the secretary of agriculture 
in ease of dispute as to the grade of any given lot of grain ; and 
•a general supervision of the inspection and grading of grain, 
with authority to publish the results of his findings. Should 
legislation along these or other lines, providing for a uniform 
and definite system of grading, be enacted at the coming session 
of Congress, I see no reason why standard grades should not be 
established soon thereafter. Such grades might not be com- 
plete in every respect, but the investigations would be continued 
with the view of making modifications in the grades from time 
to time as the best interests of the country might require. 



H. E. EMERSON 199 



TROUBLES OF THE GRAIN INSPECTOR IN 
GRADING GRAIN UNDER PRESENT STAN- 
DARDS AND MARKETING METHODS 

H. E. Emerson 
Chief Grain Inspector, State of JVTinnesota 

In Minnesota up to the year 1877 there was little, if any, local 
or terminal grading of grain. The grading practice was of an 
individual and arbitrary character, the different grain buyers 
grading according to their individual judgments. There was no 
uniform effort upon the part of any association representing line 
elevator companies, millers or buyers, looking toward the estab- 
lishment of anything that might be called a set of grading rules, 
which would define the characteristics of the various grades of 
different grains. 

Up to this time this system of marketing and grading grain 
worked fairly well, because it was largely a matter of agreement 
between the producer and the buyer, and the volume of business 
was extremely small and was confined very largely to wheat. 

The raising of wheat 40 years ago was confined largely to the 
area tributary to the Mississippi river, and the primary wheat 
markets along this river at that time were among the most im- 
portant in the world. Among them were Winona, Wabasha, Lake 
City, Red Wing and Hastings, all in the State of Minnesota. 
Both mills and elevators were located at all of these points. Good 
crops and good prices gave this territory advertising that re- 
sulted in increase of population and expansion of the wheat rais- 
ing area. 

The result was the development of the milling industry at 
Minneapolis, largely developed and still largely maintained by 
the use of the magnificent water power at St. Anthony Falls. 
The ultimate outcome of this method of marketing and buying of 
grain was the formation of a Millers' Association, the organiza- 
tion of the Minneapolis Chamber of Commerce, the establishment 
of grading rules by the iMillers' Association, the ultimate reach- 
ing out into the countiy of better wagon roads, and the construc- 
tion of steam railroads. 



200 MARKETING AND FARM CREDITS 

This developed the local warehouse on the different lines of 
railroad. These houses were owned and operated by the railroad 
companies, later by line elevator companies and today most of 
them are operated by independent, farmers ', cooperative elevator 
companies and line elevator companies, while a few of them are 
operated by mills throughout the state. 

Origin of Grain and Warehouse Law 

The development of large terminal markets and the demand 
for an impartial grading and weighing system was responsible 
for the enactment of a Grain and "Warehouse Law in our state 
which became effective June 1st, 1885. This placed the regula- 
tion of the grain business and the duty of establishing grades for 
grain, and required supervision over the weighing of grain at the 
terminals with and by the Railroad and Warehouse Commission. 

The Legislature of 1885, which passed the original act referred 
to, appropriated the sum of $1,000 from the revenue funds of the 
state for the use of the state grain inspection and weighing de- 
partments, and gave to the railroad and warehouse commission 
authority to establish fees for the inspection and weighing of 
grain. This original appropriation is the only sum ever paid into 
the state treasury for the use of that service from moneys de- 
rived by direct taxation. The department has been maintained 
continually for 30 years from the fees produced by the service 
itself. 

The railroad and warehouse commission established the Minne- 
sota grade rules and the rules for the operation of the inspection 
and weighing departments. These rules have not been materially 
changed, except to add to them to provide rules to govern in the 
grading of the different new varieties of grains that have been 
produced as the result of experiments conducted by the federal 
and the state agricultural departments and colleges. The essen- 
tials, so far as grading of wheat is concerned, remain the same now 
as then, but it is interesting to note that by the development of 
the country, attended with the clearing away of its forests and the 
breaking of its prairies, that while for the crop year ending Au- 
gust 31st, 1886, 38 per cent of the spring wheat inspected ''on 
arrival" graded No. 1 Hard and 35 per cent graded 1 Northern, 
compared with the crop year ending August 31st, 1915, only .8 
per cent of the spring wheat graded 1 Hard and 22.6 per cent 
graded 1 Northern. 



H. E. EMERSON 201 

Under our state law the local grain warehouseman must pur- 
chase his grain in conformity with the Minnesota grade rules, 
which have been legally established for the guidance of the state 
grain inspection department in determining its official grades at 
the terminal markets. These grade rules, formerly established 
by the Minnesota Eailroad and "Warehouse Commission each year, 
have since 1899 been established by an independent tribunal, 
known as the Minnesota Joint Boards of Grain Appeals, consisting 
of 6 members, all appointed by the governor. 

The grades are required by law to be established annually at a 
joint session of the 2 grain appeal boards of 3 members each 
and cannot be changed during the crop year, except by and with 
the consent of 5 of the 6 members attending a meeting which has 
been called and advertised for that purpose. 

Grain Inspection Works Under Civil Service 

Since January 1901 our railroad and warehouse commission has 
placed its grain department on a practical civil service basis, 
although we have in our state, no civil service law which has re- 
quired such an action. Appointments to grain inspectorships are 
made by the chief grain inspector, with the consent of the rail- 
road and warehouse commission, from the class of employes al- 
ready in the service in minor positions and then only after com- 
petitive examinations which actually test the practical knowledge 
of the applicant in the actual grading of grain. Many of the in- 
spectors on our force have been in the service for more than 20 
years. 

The position of the chief grain inspector is in no sense political. 
His appointment is made by 3 members of the railroad and 
warehouse commission, who are elected by the people. It is true 
that he may be removed at will, but his selection by the board is 
upon the basis of competency as an administrative officer and as 
an expert in the grading of grain. 

'The Minnesota State Grain Inspection Department is, therefore, 
not a political department and cannot be made a political football 
by changing administrations. 

"With this brief historical summary to establish in your minds 
the process of evolution of state grading in Minnesota, permit me 
to suggest that if the local warehouseman purchases grain on the 
basis of terminal grades, the grades in our state ought to be uni- 
form at all points, or reasonably so, as near as human judgment 
might determine. It likewise ought to be said that No. 1 Northern 



202 MARKETING AND FARM CREDITS 

wheat so graded in Duluth, ought to be accepted at points down 
the lake and elsewhere as No. 1 Northern. As an illustration — a 
cargo going out from Duluth under a grade of No. 1 Northern 
should be and as a matter of fact is, deliverable in Chicago on that 
same grade, likewise at Buffalo or at New York. 

Minnesota grades have the distinction of being acceptable in 
Europe, and it has only been when grain delivered upon our state 
grain inspection certificates has been mixed with other grain in 
transit, that objection is raised by our export friends. It should 
be remembered, of course, that the authority of our grade rules 
reaches only to the confines of the state and we cannot regulate 
the grades beyond our own borders. 

Running Down the False Grades 

I presume as long as grain is to be handled in commerce and 
graded, that some shippers will attempt deception in the loading 
of their cars. We have found, as all other departments have, a 
certain percentage of ears received at our terminals that have 
been plugged, some apparently with an intent to deceive inspec- 
tors, and others accidentally so loaded. "We have found eases of 
deliberate and wilful intention of setting up cars where the plug 
indicated the use of a bag or a barrel to receive the inferior grain, 
the receptacle being removed after the loading has been completed. 
This kind of a set-up would leave a pocket of inferior grain sur- 
rounded by the main body of grain. 

We Ihave, in eases of the discovery of such plugs, graded the 
entire car upon the basis of the grade given to the poorest found 
in the car. This practice has been changed so as to require 
such cars, when found, to be graded No. Grade CC, sent to an 
elevator to be cleaned or handled, and if sustained on reinspec- 
tion and appeal, the department assesses an arbitrary fee of $5 
per case. 

The physical condition of grain that is marketed and comes 
to our terminals for state inspection, presents about the only 
troubles of a state inspector in grading grain under present state 
standards. He is not concerned with the producer or the pur- 
chaser. He attempts, in our state, to stand as an unbiased ar- 
biter between the parties interested in the complex game of pro- 
ducing, marketing and consumption of grain. As a matter of 
fact, we are not confronted with any real serious troubles in the 
placing of our grades on grain. 



H. E. EMERSON 203 

The various classifications of the Minnesota grade rules, which 
largely follow the standard grades that are fairly uniform in 
most of the grain producing states, made so through the efforts 
of the National Grain Dealers' Association and the Association 
of Chief Grain Inspectors, require that grades be provided for 
a large number of varieties of so-called spring wheats, different 
varieties of oats and barley, flaxseed and corn. In our markets, 
our grain inspectors must have a knowledge of the charaeteris- 
tiees of Scotch Fife, Bluestem, Marquis, Minnesota 169, Minne- 
sota 188, Durum, Preston, Humpback, Climax, Velvet Chaff, 
and other so-called varieties of spring wheat. 

Where Inspector's Duties End 

If the inspector exercises his judgment in the placing of his 
grades on these different varieties, he has done all that can be 
reasonably expected of him in the grading of wheat for com- 
mercial use ; and while the judgment of men may vary, as long 
as grain is to be graded in commerce in this way, if mistakes oc- 
cur a recourse should be had, and in our state is had, by a re- 
viewing body for a reinspection. Again, should the parties in- 
terested in a particular sample, car or cargo be still dissatisfied, 
in our state they have a final court of review called the board 
of grain appeals. To this board must be submitted all cases of 
disputes and the decisions rendered in such cases by the board 
€f grain appeals are final and conclusive upon all parties. 

Grain inspectors are never so well pleased as when the qual- 
ity of the crop is good. They are but human and naturally de- 
sire to give satisfaction and to receive approval for their official 
acts, rather than not to give satisfaction and have their acts dis- 
approved. Criticism is the same the world over whether it be 
directed against a public official as to his acts in grading grain, 
or against professional men in other lines of work. 

Under our ]\Iinnesota grade rules today we find this to be true. 
A sample may be submitted to an inspector who is a good judge 
of grain, — ^his verdict may be that the sample submitted ^vill 
grade No. 1 Northern. He may figure that it is a very poor No. 
1 Northern, or as we say, the very lower edge of No. 1 Northern. 
That sample may in turn be submitted to another grain in- 
spector, equally as good a judge of grain as the first, and his de- 
cision may be that the sample will grade 2 Northern. He might 
say to you that it was an extremely good 2 Northern, and that 
there was a question in his mind as to whether or not it should 



204 MARKETING AND FARM CREDITS 

be graded 1 Northern. In other words, it is the very upper edge- 
of the 2 Northern grade. 

It is not sufficient, in my opinion, for grades to be made, that 
a state department, a federal department, or an association 
grading gi*aiu at a large terminal market, might be able to follow 
in the application of those rules. If the grades so established 
are too numerous for the individual classitication and if the re- 
finement is carried to the extent that the grades are not practical 
in the country, it would mean that the producer who parts with 
approximately 95 per cent of his crop to the local warehouseman 
is going to be the loser. When he has made a delivery to the 
local warehouseman in the country, he usually has sold his grain 
outright. 

Grain inspectors, if they are competent judges of grain, can 
follow any set of grade rules, — primarily because they are 
trained judges of grain; secondarily because they have every" 
grading facility and tool and appliance of the profession at 
hand to assist them in the application of the rule. It necessarily 
follows that the buyer of grain at the local warehouse, handi- 
capped as he is by the lack of tools and appliances, handicapped 
further by the fact that he is rushed usually from daylight un- 
til long after dark in taking in his grain, cannot grade either as 
closely or as successfully as a terminal grain inspector. 

Minnesota Establishes a Laboratory 

In 1909 the Minnesota legislature permitted this department 
to assist in the equipment of a grain testing and a milling labora- 
toiy at the state college of agriculture, which is connected with 
our state university. This laboratory was made available to the 
state grain inspection department, the board of grain appeals 
and the railroad and warehouse commission and was used in 
milling and baking tests, and in chemical analysis of various 
samples of the different grains. Since that time the railroad 
and warehouse commission has provided a most fully equipped 
grain testing laboratory and milling department, which is used 
by both the inspection departments and the appeal boards. 
Milling and baking tests of grain are carried on by our state 
chemist daily and the work is carried on in conjunction with and 
as assistance to our grain inspectors. 

There is one feature of the marketing of grain that has not 
been touched upon very extensively, and that is the threshing 
operation. In my opinion, it would be far better for the thresher 



H. E. EMERSON 205 

to place sieves in his separator in place of blanks and to deliver 
to the producer his clean grain separate from the various foul 
seeds, so as to make a complete separation of grains in separate 
lots, to be sacked and delivered to the man for whom he was 
threshing. 

JIandling Dockage Questions 

In the ordinary marketing of grain today in our country the 
farmer who raises grain with a pound or two dockage of the ordi- 
nary kind, which might consist of wdld buckwheat, pigeon grass, 
fine weed seeds or other foreign seeds and substances, is not only 
paying freight on that dockage, but he is giving the dockage 
away in addition. If this were collected for him at the time 
Iiis grain was threshed and delivered to him separately, it would 
give him something of a commercial value for the feeding of his 
stock and he would be ahead by marketing clean grain and would 
save the freight on the dockage. On the other hand, it is true 
that oftentimes dockage may be heavy on a particular carload 
of grain and that the dockage may consist of mustard seed, flax- 
seed or other seed that is valuable when it is present in an amount 
that would cover the cost of cleaning and leave a profit. In 

,such cases the dockage is an asset and not a liability, because 
purchasers are many times found for such ears who will pay a 
premium therefor over the regular straight price for a given car 
of the same grade witihout such an excessive dockage. 

"Whether a market grades down for the presence of foul seeds 
and admixtures of other grain, foreign to the main body, or 
whether a market docks for such substances, is not material. 
The result to the producer is the same. He generally is the 
loser by permitting the shipment of his grain in a dirty condi- 
tion. 

Marketing methods in vogue in our state do not materially 
vary with the location. A large proportion of grain is threshed 
from the shock and is marketed just as soon after it is threshed 

. as possible. In many cases the grain is hauled direct from the 
threshing machine to the local warehouse. It is nearly all 

: sacked at the machine and taken to market in sacks. In some 
of the states grain is hauled in bulk in large wagons direct from 
the machine to the local w^arehouse where it is usually purchased 
by the local warehouseman, rather than being stored by the 
owner. 



206 MAKKKTINO ANP FAKM CRKinTS 

It" tho local ninvkot at whioh tluji ^rain is prosontod for sale 
is a oompotitivo point aiul oompotition is \iuusually koon, wo 
have found it true that ^raiii bviyoi's \Yill fivquontly disivijard 
our terminal ^rade miles and will over grade or under dook in 
or\ier not to lose a onstoiuer's business. Many times we have 
found a Ux'al waivlionsenvan bnyinir jrrain on the baais of No. 1 
Northern when he knew full well that the ijrain eould not pos- 
&ibl\- grade moiv than "J Northern at the terminal, but this is 
a condition which is not ireneral. 

The pwducer. after he has cleared his farm and has continued 
to raise wheat on the Siuue land without the pix»per fertilization 
or rotiUion of civps, tinds himself with wheat that is inferior, 
when it is iH^npared with the tii-st ctvps that he has taken, yet 
he may tigure. and we often times tind that he does believe, that 
the local buyer should give him a grade higher than that to 
which he actually is entitled. He dix^s not oompivhend that the 
deterioi*ation of his grain, results from his practice of farming, 
and the falling otY in the percentages of the higher grades, to 
Avhieh I have made reference, indicAtes cilianges in soil euudi- 
tions. a weakening of the land and the using of pooivr seed. 
This invariably results in the deterioration of the grain raised, 
yet at the same time the producer has not seemingly, until very 
ivivntly. i*eeognized the fact that this is curable only by per- 
sistent ivtation of civps and vHn-sistent fertilization. 

To conclude, the ivgnlatory methods of gitiin inspectioi\. to be 
beneticial to the producer, must be of a character that will per- 
mit the oixlinary average country grain buyer to apply the rules 
pi*esci*ibed and must be made with the idea of the protection of 
the producer, rather than for the benelit of elevator or milling 
companies. 



WAREHOUSING AND STANDARDIZA- 
TION OF FARM PRODUCTS 



STATE WAREHOUSING AND THE COTTON 
BALE IN THE SOUTH 

Clarence Ousley 
Director of Extension, A. & M. College of Texas 

Cotton does not differ from other staple crops and commodi- 
ties in respect to the advantages of proper warehousing and in- 
telligent marketing, but it presents the most interesting problem 
in the economics of American agriculture because cotton is our 
most valuable article of export, because it ranks among the 
world's chief necessities, because we produce two-thirds to three- 
fourths of the world's supply, and yet American cotton suffers 
more preventable waste and submits to more downright graft 
than any article of commerce. The chief dependence of the 
South and the nation's principal item in settling balances of 
trade, it should be the object of our greatest concern, but we 
handle it as if it were of little value, as if it were indestructible, 
and as if it were the common possession of all who may chance 
to touch it. 

By our methods of baling, compressing, marketing and trans- 
porting, the cotton crop of the South is subjected to a prevent- 
able waste of $10 to $20 a bale. On the normal annual produc- 
tion of approximately 15,000,000 bales, this amounts to a loss of 
$150,000,000 to $300,000,000 a year. 

In the first place the average "country damage" due to ex- 
posure in uncovered cotton yards, on compress platforms, at rail- 
road stations, and in the farmer's backyard, amounts to $2 a 
bale. Of course, not every bale suffers country damage but the 
$2 is the average computed by the United States Department of 
Commerce after careful investigation. The indiscriminate 
slashing of the bale for the purpose of sampling imposes a total 
cost of 100,000 bales a year, as computed by the department of 
commerce, kno^vn as the "city" crop, being the pluckings of 
the buyers and the stealings of a host of persons who hang about 
the yards and shipping points. Many buyers contend that but 
for the gain of the city crop they would be compelled to charge 
higher commissions or fees for services, and therefore that the 
city crop is not a loss to the producer. The answer to this is 
first that twice as much cotton is taken from the bale as is needed 
14— M. F. c. 



•210 MARKETING AND FARM CREDITS 

for a logritimate sample, and soeoiul that tho miseellanoous sam- 
ples so eolleeted grade Unver than the orig-inal eotton ^vo\lld 
grade. It is at least fair to s;\y that the system of sampling 
tliei*efoi*e involves a. very decide*.! loss. The sampling of the bale 
I'eqnires also pateliiug at the eompress. and the ragged condition 
of the bale, as a consequence of the Siimpling and the patching, 
requires a higher rate of insurance. Another important item 
of loss is the ditference between the actual tare of the bale and 
the tare deducted by tiie buyers. The weight of bagging and 
ties does not, exceed '20 pounds, but the commercial dedtic- 
tion for tare is 6 per cent or oO pounds on the standarvl bale 
of 500 pounds. This means 10 pounds of eottou from every bale. 
Again, as -with the samples, the buyers contend that the profit iu 
tare enables them to handle the business at a smaller charge 
than they would be compelled to make if the tare were precise. 
As to this, I hold that the best way to do business is to do it 
frankly and in precise dealing. These indirect gains from 
''trimmings" are a constant invitation to dishonesty. Another 
loss to the farmers is the inaccuracy, not to say dishonesty, iu 
gi'ading. Xot one farmer in a hundred is able to "class" cot- 
ton. It is sold upon the classification fixed by the buyer. The 
competition among bttyers is presumed to develop fair grading, 
but the presumption is shockingly disputed by expert investiga- 
tions by the bureau of markets in the states of Arkansas. Okla- 
homa, and Texas, which reveal differences on the Siiitie day and 
in the same market as on the s;ime day in different markets 
within each state of from GO cents to $2 a bale on the higher 
grade and from $5 to $30 on the lower grades. The only allow- 
able ditference for the same grade of i\>tton in 2 prinuiry mar- 
kets on the same day is the ditfercnce in freight to the port. It 
will be readily understood that under exceptional conditions a 
merchant buyer uuiy give a premium on a certain lot of cotton 
in order to collect a debt, but the variations disclosed by the 
bureau of markets are so numerous and so wide and so extended 
in area as to demonstrate clearly that in most part they are due 
to deceit, which is easily practiced when our farmei*s have not 
the infornuition necessjiry to classify their product. 

Forcing Sales Cause of Loss 

Another great cause of loss is the habit of forcing the entire 
crop upon the market within 3 or 4 months, or from Sep- 
tember to January, though 12 months are required for its 



CLARENCE OUSLEY • 211 

consumption by the spinners. A record of cotton prices from 
the season of 1901-1902 to the season of 1914-1915 inclusive, 
compiled by M.r. Theodore Price of New York, shows that every 
spring during tbat period cotton sold at from 40 to 600 points, 
or from $2 to $30 a bale higher than in the preceding fall. Mr. 
Price deserilies this annual price phenomenon as the "Autumnal 
Dip" and attributes it, as 1 have intimated, to forcing the crop 
upon the market within 3 or 4 months. 

Another Cause of the ''Autumnal Dip" 

There is another very important factor in the "Autumnal 
Dip." It is the lack of adequate information concerning the 
rate of consumption by cotton mills in foreign countries. We 
publish in June of every year the cotton acreage in the United 
States; we publish the condition of the plant from month to 
month, and beginning in October we publish the output of the 
gins every month. These publications are made by the gov- 
ernment; they are as accurate as human intelligence can ap- 
proximate, and they are accepted by the trade as reliable. 
They are marked always by fluctuations in the price on the 
market accordingly as they are above or below the expecta- 
tion of cotton traders. By this means the government exhibits 
constantly, from the time the cotton is planted until it is put 
upon the market, all that miay possibly be known concerning 
supply. And this is a service that should be performed for the 
benefit of commerce. In fact before this information was pub- 
lished, the spinners and traders made their guesses as to the 
acreage, the condition of the plant, and the output, and con- 
sciously or unconsciously they guessed to their own advantage. 
The government service, therefore, has been valuable not only 
to honest traders but to producers in protecting them from mis- 
representations or the bad guessing of spinners and specula- 
tors. But, what is the other side of the question? What do 
we know about demand? Practically nothing. I agree that 
we cannot sell cotton except under the law of supply and de- 
mand, but I contend that we cannot fairly determine economic 
value without knowing demand as well as supply. Supply and 
demand constitute an economic equation, and any student of 
the high school will tell you that it will disturb an equation as 
much to slibtract from one side as to add to the other. If a 
new fact, exhibiting an increase of supply, should depress the 
price of cotton, then a new fact exhibiting an increase of de- 



212 MARKETING AND FARM CREDITS 

Tuaud should advanoo the pvioe. and wo oaiuiot know the true 
price at a given time Mithoiit knowing demand at that time as 
fnlly as we knoAv supply at that time. 

More Information on Consumption Needed 

Now the government publishes an annual report of world 
consumption, but it is given out along in Februaiy afttr the 
farmers have sold their cotton, and is therefore of no value 
except by way of aduu^nition in determining the acreage for 
the ncAv year. During the last few years also, in response to 
representations made from the South, particularly by a con- 
ference of the cotton states governors in 1912, the Census De- 
partment is publishing monthly reports ot' American consump- 
tion, but American consumption is only one-fourth to one-third 
of world's consumption. Therefore we have only one-foiirth or 
one-third of the demand factor in om* equation. For the last 
few months the Department of Commerce, in response to an 
urgent appeal which I presented to Secretary ;^[cAdoo as a mat- 
ter of affecting bank loans on cotton, has been publishing from 
our consular agents reports of cotton consumption in a few of 
the foreign countries, but no report has come from Great Brit- 
ain, the principal cotton consuming country, because the spin- 
ners are unwilling to furnish it. Our consuls should be required 
to furnish intelligent estimates when they cannot obtain official 
information, but I fear they will not do so unless pressure is 
brought to bear upon the Department of Commerce by an of- 
ficial body of citizens like this, or unless there is a congres- 
sional mandate to do so. No etYort should be spared to ex- 
ploit deu\and as fully as we exploit supply. 

There are two chief elements in the problem of successful 
marketing, one is information and the other is packing. The 
information must be supplied by governmental agencies, be- 
cause the expense of gathering it in a world-wide market is 
beyond the resources of producers, but the packing is a matter 
of education among producers themselves, though it may be 
considerably bettered by appropriate legislation. 

In Texas we have inaugurated a rather ambitious reform in 
cotton handling and marketing. A special session of our state 
legislature in August, 1914, enacted a comprehensive statute 
providing the means of organizing mutual associations of farm- 
ers for the storage and marketing of their products, and pre- 
scribing a method of sampling cotton at the gin. The ginner 



CLARENCE OUSLEY 



213' 



is required to take a sample from the bale before it is wrapped, 
and to issue a certificate under bond that the sample is a fair 
sample. The purpose of this requirement is two-fold. In the 
first place, it is designed to furnish a sample which will remove 
the necessity for cutting the bale. As I have explained, the 
cutting of the bale is the occasion for much waste and the ex- 
cuse for much graft. In the second place, the regulations of 
the state warc^house department, under the authority of this- 
statute, aim to prohibit careless packing, mixed packed bales, 
water packed bales, and dirt and trash, all of which though 
practised in small degree, discredit the American bale in for- 
eign markets and therefore impose a loss upon all American 
cotton. 

Ginners Oppose Gin Sampling Feature 

The gin sampling feature of the law has met with stout re- 
sistance upon the part of most ginners, because it requires 
some small trouble and a slight expense, and it has aroused 
opposition among buyers who are slow to acknowledge that 
present methods are at fault, and some of them contend that 
the gin sample lacks the gloss of the packed sample and there- 
fore does not represent the true value of the cotton. This con- 
tention is disputed by many expert and trustworthy buyers, 
and by experts who are not buyers and have no self-interest 
in the methods of sampling. As a consequence of adverse rep- 
resentations made by ginners and buyers, many farmers have 
been persuaded that the gin sample is a vexation and a loss 
and most cotton in Texas this year has been sold by the old 
method of bale sampling, though in many of the primary mar- 
kets the cotton sold is sold altogether upon gin samples, and 
both farmers and buyers are entirely satisfied. It remains to 
be seen whether the work of education can save this law from 
present opposition, or whether the imperfections which are 
common to every new measure of reform can be overcome in 
time to prevent reaction which might destroy the law or bring 
it into disrepute. But I am hopeful that with another year of 
demonstration our warehouse and gin department will be able- 
to make satisfactory demonstrations and to adopt rules and 
methods which will give that degree of popular satisfaction 
which is necessary for the enforcement of any law. 

In any case the agitation has been most wholesome and' 
highly beneficial to producers. It has brought public con- 



214 MARKETING AND FARM CREDITS 

demnation upon many evil practices in the handling of cotton. 
It has accentuated the necessity for storage for j)rotection and 
for gradual marketing ; it has shamed and in large degree ar- 
rested much of the indiscriminate plucking at cotton and com- 
press yards ; it has brought our bankers and business men to an 
intelligent appreciation of theii' interests and the country's in- 
terest in protecting cotton from waste and graft; it has been 
one of the important factors in causing many cotton ware- 
houses to be erected where there were none before, and it has 
had no small influence in reducing the rate of interest charges 
by banks to, farmers for holding cotton against market depres- 
sion and congestion. 

Federal Aid to Marketing 

We may or may not have in our Texas warehouse and gin 
statute the state legislation which is needed, but we have made 
an approach to it, and I believe that we point the general di- 
rection of reforms that may be accomplished by state legisla- 
tion. I am not sure that national legislation can accomplish 
much of anything in respect to marketing, except to sustain, 
strengthen, and quicken the agencies for the gathering and dis- 
semination of information. I am far from saying that the 
government, either federal or state, can do no more than I have 
indicated, but I am confident that it should do the things that 
are manifestly needed before it ventures upon experiments. I 
rather believe, after considerable study and reflection, that our 
present need is not for new legislation but for education — edu- 
-^ation of both our statesmen and our producers in economic 
i;ruth. The government cannot become a selling agent; it 
-cannot valorize the farmers ' products ; it can only furnish such 
iservice as in the nature of things the producer himself cannot 
■provide. And after that is done, the remainder of the problem 
is in the hands of the producers, and its solution is to be accom- 
plished by group action according to the sound principles and 
the approved practices of cooperative endeavors. And this 
is another matter requiring education, and very patient and 
painstaking education at that, for in this matter we encounter 
the inertia and the habit of generations of American citizens 
taught from their childhood to exalt individualism and to ra- 
frain from entangling alliances with their neighbors. Our 
producers have yet to learn that they can maintain their indi- 
vidualism, which I hold to be the prime factor in all human 



CLARENCE OUSLEY 215 

progress, and at the same time can cooperate with, their neigh- 
bors for mutual profit. 

Why South is Backward 

I ask the privilege of saying a few words at this moment. 
From the excellent addresses to which we have listened, it 
might appear to the uninformed reader of these proceedings 
that southern farmers in contrast with northern farmers are 
incapable and untrustworthy, and that southern bankers and 
merchants in contrast with northern bankers and merchants 
are unscrupulous usurers and extortioners. I acknowledge 
that southern agriculture is backward compared with the ag- 
riculture of the Middle West and the North, but there is a rea- 
son for it. I beg to remind you that 50 years ago the South 
was required to pay the penalty of a grievous mistake which 
both the North and the South had made, in the introduction 
and maintenance of slave labor. As a consequence of the war 
between the states, the South was prostrate. The old system 
of slave labor was destroyed, and there was nothing at hand to 
take its place. Resources were exhausted and there was no 
capital and little energy to begin anew. The only basis of credit 
for operation was the cotton crop we intended to plant. That 
was the beginning of the crop mortgage system from which we 
are just now escaping. But our poverty was not the worst of 
our troubles. We were the victims of a mistaken partisan 
jiclicy which undertook to set the negroes above us, and we 
were plundered by carpet-baggers who seized our common- 
wealths and exploited us for unholy gains. All wise men, 
North as Veil as South, now deplore that monster political 
blunder. But for 10 years we were compelled to give our best 
thought, and in many cases our physical energies, to saving 
our civilization and for recovering our commonwealths from 
ignorance and venality. It took us another 10 or 15 years 
to get in a good humor about it, so that for 20 or 25 years the 
best thought of the South was given to social and political 
problems lying at the very base of our civilization. It was 
not until the Spanish-American war that the people of the 
United States realized that the South was no longer a rebellious 
section, but was in spirit and in deed a part of the Union. It 
was not until the administration of President McKinley that the 
last of the measures designed to coerce the South disapeared 
from the federal statutes. Since that time, the South has made 



216 MARKETING AND FARM CREDITS 

wonderful progress iu all economic and industrial undertak- 
ings. Our agriculture has taken on a new form, and I feel war- 
ranted iu saying that no section of the world has made such 
progress as we liave made in tlie last 15 years. I am pleased to 
testify that our bankers and merchants during the last year or 
two especially have given themselves devotedly to the study 
and inauguration of credit reforms. The South last year for the 
fii*st time in her recent history fed herself, and her cotton was 
a profitable surplus crop. I beg you to believe that I am not 
speaking with any sectional feeling. I am only trying to state 
the truth of history so that you may understand why we have 
been backward and that we are now alert and moving for- 
ward. 



HOW THE TEXAS WAREHOUSE LAW IS 
ADMINISTRATED 

Fred W. Davis, 
Commissioner of Agriculture of Texas. 

There is no question today quite so important to the j^eople 
of Texas, and, indeed, of the entire South, as that of markets. 
The lack of anything like a concrete system cuts with the im- 
partial precision of a two-edged sword, in that it disarranges, 
if it does not actually discourage, production, and curtails con- 
sumption, thereby lowering the standard of living for both 
producer and consumer. It is not a new question in my state, 
though it has been the subject of acute agitation for a few 
years only. The much discussion it has evoked, both by the 
press and from the rostrum, if it has had the good effect of 
arousing statewide interest has not until recently succeeded in 
devising plans which promise to prove practical or satisfactory. 

I do not consider it my mission here to discuss the marketing 
as an abstract question, but will state that the first great cause 
of conditions, in Texas at least, has been the unwillingness of 
the growers to grant to any agency the necessary authority to 
successfully establish, build up and maintain trade relations. 
"Without a clear knowledge of trade conditions as they actually 
or should exist, face to face with so much speculative crooked- 
ness, much of which in fact they had been so long the victims, 
it is not surprising that the growers have hesitated to clothe 



FRED W. DAVIS 217 

their chosen agents with the authority necessary to conduct a 
successful business. Again, it has been observed that in a ma- 
jority of instances in which sufficient power has been confided 
to their agencies it has been done under the stress of enthu- 
siasm and too much was exjjected in too short a time. Conse- 
quently, with the enemies of cooperation making flattering re- 
ports about what they were able to do — things that the trade 
agencies were unable to do — and with an "I told you so" air 
discounting cooperation, it was, in a measure at least, natural 
that the producers became discouraged, grew suspicious, the 
effort at organized marketing failed, and the growers returned 
to the same old system permeated with graft, and accepted the 
same old excuses. All of these efforts, however, are educa- 
tional and are not wholly lost. Each succeeding effort is 
usually stronger and more determined than its predecessor and 
the general public is in the meantime becoming more interested 
in general conditions and the urgent need of action. 

In Texas the work of the farmers' institute, the Farmers' 
Congress, the Farmers' Union, and many other forces, after 
a few years of active agitation, prepared the public mind for 
necessary legislation along the line of markets. About a year 
ago a called or special session of the legislature enacted a 
warehouse and marketing law, which became operative last 
June, and superseded an emergency law, previously enacted, 
which expired by limitation last September. It is well enough 
to remark right here that the most potential influence in the 
enactment of this law was the experience of the cotton pro- 
ducer in 1910, wben he realized approximately 15 cents a pound 
for his crop — high-water mark for several years — and in 1911, 
when his vastly larger crop brought scarcely more than half 
that price, netting him for his output much less than he re- 
ceived for his previous smaller crop. Subsequent experience 
proved that it was not nearly so much overproduction during 
this last-mentioned year as it was over-rapid marketing that 
brought about this collapse of price, and yet it was apparent 
that unless some radical change in the system of marketing 
was devised the experience of 1911 would be repeated and ag- 
gravated every year an average crop was produced. 

Tenants Complicate Problem 

The vast majority of Texas farmers, and probably farmers 
throughout the entire South, belong to the tenant-class. They 
are share-cropi:ers, croppers-on-credit or an advances by the 



218 MARKETING AND FARM CREDITS 

landlord, banker or merehant. Avho must be paid as soon as the 
cotton can be put on the market. The problem involved Avas 
the tinaneing of the farmer on a plan by whieh his output eould 
be kept off a rush-market and fed to a demandiug-market. 
The warehouse and marketing law was the solution sought, and 
if you will bear Avith me for a few minutes I will endeavor to 
outline its provisions. 

The purpose of the Texas law, as stated in its enacting 
clause, is "to provide a system of state bonded warehouses 
and to afford a method of cooperative marketing for those en- 
gaged in the production of farm and ranch properties." 

Briefly stated, the law, which by its terms is to be adminis- 
tered by a board of supervisors comprising the governor, 
commisioner of banking, and commissioner of agriculture, sal- 
aried in their ofHcial capacities and therefore drawing no pay 
as supervisors, authorizes the charter of corporations which 
'"shall have the right to erect, pui-chase or lease and to operate 
warehouses, buildings, elevators, storage tanks, silos and such 
other places of storage and security as may be necessary for 
the storage, gradmg, weighing and classiticatiou of cotton, 
wool, wheat, corn, rice, alfalfa, fruit, silage and other farm, 
orchard and ranch products, and all weights, grades and 
classes shall be made in accordance with the standard of 
weights, grades and classes prescribed by law and by the board 
of warehouse supervisors.'* 

Enumerating the powers and duties of the board of super- 
visors it is provided that they shall •" control the administra- 
tion of this act and shall formulate and enforce necessary 
rules and regulations to eft'ectuate" its purposes. Among the 
powers stipulated is that of employing such experts, exaunn- 
ei*s, gin inspectors and clerks and any other needed service in 
carrying out the purposes of the law: and to a certain extent 
the board and the examiners appointed by it are clothed with 
inquisitory powers, being authorized to administer oaths. 

Charges for storage are made subject to limitation and regu- 
lation by the board of supervisors. 

Fixing Grade Responsibility Upon Ginners 

"With reference to public gins, all such, whether operated 
by individuals, partnerships, joint stock companies or cor- 
porations, are charged by law with a public use and must se- 
cure license from the board of supervisors to operate as such. 



FRED W, DAVIS 219 

Every such gin is required, under penalties and a performance 
bond executed concurrently with the application for license, to 
take from every bale ginned by it 3 fair, true and correct sam- 
ples of cotton, 1 to be filed and preserved by it, and the 
other 2 delivered to the owner of the cotton, who, if he store 
the bale in the bonded warehouse, must deliver one to the ware- 
house manager to be preserved by him. The fairness and cor- 
rectness of these samples, guaranteed by the bond referred to 
above, is to be further certified by the sworn affidavit. Every 
bale ginned by a public pinner must be securely wrapped in a 
prescribed grade of bagging so as to completely cover the cot- 
ton, and each bale so permanently marked as to show by what 
ginner or gin it was ginned. 

If the owner stores his cotton in a bonded warehouse he 
must be given, as he demands, a negotiable or a non-negotia- 
ble receipt, both of which are specifically described. The re- 
ceipt must show on its reverse side all liens or encumbrances, 
if any, on the cotton. 

The bonded warehouse is required by the law to carry am- 
ple solvent insurance to cover all its storage. 

The bond of the Avarehouse is required to be conditioned 
that the corporation operating it will observe and obey all pro- 
visions of the law, and such other laws as mtay be enacted with 
reference to such warehouse, and guarantees that the said cor- 
poration will exercise ordinary care in the storage or sale (if 
sale is committed to it) of the product, and guarantees also 
the classification, weight, grades and measures made by it. 

Warehouses Are Audited by State Authorities 

The law also requires of the board of supervisors the exer- 
cise of strict supervision over such bonded warehouses and 
also semi-annual, and such other periodic examinations as it 
may deem proper, into the operations of all warehouse corpora- 
tions. 

Any number of persons not less than 3, who shall be 
resident citizens of Texas, may apply to the board for a permit 
to form a corporation — conforming the application to formal 
conditions prescribed by the law. Such permit being granted, 
any number of persons, not less than 10, at least 60 per cent of 
whom shall be engaged in agriculture, horticulture or stock- 
raising as a business, and no less than three-fourths of whom 
shall be resident citizens of Texas, may apply to the board of 



220 MARKETING AND FARM CREDITS 

supervisors for a charter as public warehouseman. That appli- 
cation must contain the name of the proposed corporation ; the 
place or places where its business is to be transacted, and the 
location of its principal business office ; the purpose for which, 
it is formed; the term for which it is to exist; the number of 
its directors, -which shall not be less than 3 nor more than 25, 
and the names and residence of those selected for the first 
year; the amount of capital stock; and the application must be 
accompanied by the affidavit of 3 of such applicants that 
the capital stock is actually paid in, which capital stock shall 
in no instance be less than $1,000 divided into shares of $5. 
If any of same has been paid in other than cash, then a de- 
tailed statement as to the kind, character and value of the 
property sihall be made a part of the affidavit. Such corpora- 
tions are required by law to organize on the ''one-man, one- 
vote" basis in stockholders elections. 

Such application complying with these provisions and be- 
ing approved by the board, the secretary of state, on payment 
to him of a fee of $25, shall issue a charter, on which the com- 
missioner of banking shall issue a certificate authorizing such 
corporation to do business until the last day of March of the 
following year. 

In addition to the general powers of the board before set 
out, it is specifically required that whenever it shall have rea- 
son to believe that the capital stock of any corporation sub- 
ject to this law^ has become impaired, it shall require such cor- 
poration to make good the deficiency. It is authorized to ex- 
amine into and supervise the corporation's manner or method 
of doing business; require a compliance with laws and regula- 
tions, and if a corporation is found to be insolvent, or that 
its continuance in business will seriously jeopardize its cred- 
itors, it is made the board's duty to close such corporation and 
take charge of its eflPects as a preliminary to proceedings by 
the attorney general for the protection of creditors. 

The law contains many other provisions, but these are about 
all that are material to the purposes of this discussion. The 
products for the handling of which the organization of bonded 
warehouses is authorized includes, as has been noted, all of 
those of the farm, orchard or livestock industry, but it is 
deemed sufficient to discuss only cotton in this connection, as 
the efforts of the board have been thus far principally directed 
to the handling of that commodity. All other commodities en- 
titled to and receiving storage are entitled to the same service,. 



FRED W. DAVIS 221 

-care, protection, classification, grading, weight or measure as 
the case may be. It has, however, issued since it came into 
existence a semi-monthly bulletin in which has been listed, free 
of charge, the various productions of the farms for sale or ex- 
change, and the articles desired to purchase by other farmers 
— a modest effort to bring buyer and seller together. 

With its main provisions thus set out, it will be seen that the 
object of the law is to afford the farmer the nucleus of a con- 
crete cooperative marketing system — an agency whereby he 
can escape the sacrifice of his produce — his cotton, in illustra- 
tion — by practically compulsory sale in order to meet his debts 
incurred in the process of production. 

Now, with the cotton crop made, the problem is, if it is a 
crop in excess of the demand, to keep the surplus off the mar- 
\et and in the equitable control of the producer, until it will 
bring its intrinsic value, and it must be worked out with the 
debtor-owner. His problem is to get the money with which 
"to pay his debts without sacrificing his cotton. 

Will Warehousing- Equalise Cotton Marketing? 

Are these two things possible under the system of state con- 
trolled bonded warehouses provided by the state of Texas. 
Answering frankly, I can only say that it is yet but an experi- 
ment of a few months trial, but I can give it as my opinion that 
if it receives the support and cooperation of the farmers of 
Texas, and equally efficient systems are adopted by the other 
•cotton states and they are supported by their farmers, tjiey 
most assuredly are. 

For the system, if it works out as designed, will do these 
things: 

It will eliminate practically every source of the farmers' 
waste. 

It will secure for the owner the proper ginning and baling. 

It will secure for the owner the true grading. 

It will prevent country and other damage to the cotton. 

It will provide the owner with insurance. 

And, finally, to enable the distressed owner to hold his cotton, 
it provides him with a uniform warehouse receipt, which, (if 
he desires it) is invested with the character of an "at sight" 
negotiable security, and on which he can raise money in any of 
the commercial centers of the country. 



222 MARKETING AND FARM CREDITS 

In a nutshell, the tenant farmer — or any other cotton owner — 
under this system gets the benefit of regulated ginning, baling, 
sampling and grading in any event, and, besides the other ad- 
vantages named, a warehouse receipt he can negotiate at once as 
security for money with which to pay his debts, until, in a mar- 
ket fed to meet the exact requirements of the spinners, he can 
sell his stored cotton for its intrinsic value. 

The federal reserve banks, according to the secretary of the- 
treasury, stand ready to take our warehouse receipts as good se- 
curity at a low rate of interest, and our bankers generallj^ since 
this agitation first began, have been practically a unit in declar- 
ing that they have ample money, and are more than willing ta 
do the same thing. 

State Aid in Organizing Cooperatives 

The efi^orts of the board have been, as stated, confined princi- 
pally to the handling of cotton, although it is empowered to or- 
ganize warehouses for tihe handling of all farm, orchard and 
ranch products. The system went into operation in June, and 
the budget for this fiscal year provides for 2 managers, a chief 
clerk, a bookkeeper, a bulletin clerk, and an assistant, two steno- 
graphers, 4 warehouse examiners, and 6 gin inspectors. All 
traveling expenses, w^hen the travel is on warehouse business, 
are paid by the state. 

Since the law went into effect, 4091 gins have been licensed 
and about 2,000 have been inspected. We have found that the 
ginners, with few exceptions, notwithstanding an organized op- 
position by a few of them, have obeyed the law. We have char- 
tered 56 warehouse and marketing associations, and 114 w^are- 
houses are operating under the law. 

I am free to confess that our progress in the organization of 
w^arehouse and marketing associations has not reached our hopes, 
though it may be said to fairly meet reasonable expectations in 
view of all the attendant circumstances. It will be well for 
those whose first impression will incline them to challenge the 
record as unpromising, to reflect that it was only 3 months 
ago that the law came into full operation by superseding the 
emergency act; entirely too short a time in which to test the 
merits of any great enterprise under the most favorable condi- 
tions. Again, from the moment the law was mooted it encoun- 
tered the determined opposition of a most influential class — the 
ginners — who imagined it impossible to construct a law that 



FRED Wl DAVIS 223 

would not seriously threaten their interests. But more than all 
else that operated to retard the organization of these institutions 
was the wholly unlooked for high price of cotton and cottonseed 
in the open market, resulting from the short crop — the shortest 
apparently since 1910 — which brought the curb demand to the 
supply. 

Changing a Social Order 

The experiment, as shown, is yet in the very first stages of its 
test, in its earliest infancy, and it would be unreasonable to ex- 
pect one involving such vast interests to blossom into a huge suc- 
cess with the first season. In the first place, the success of the 
plan depended, as it yet depends, upon the cooperation of the 
vocations — not only of the farmers, but of the bankers, mer- 
chants, and business men generally — and yet, it contemplates 
not only a radical change in a long established and crude, or 
rather arbitrary, marketing system, but the complete subversion 
of that system, and the erection upon its ruins of one that will 
be just alike to the producer and the consumer. Three years 
instead of the three months of its full operation, would be a more 
reasonable time in which to work out the problems involved. 

It is true that many ginners have yielded a reluctant obedience 
to the law, protesting their opposition to it, and openly sympa- 
thizing with the action of the individual members who took the 
constitutionality of the law into the courts.* Their objections, of 
course, were based altogether upon the regulations and restric- 
tions imposed upon their operation by the law. For example, 
they oppose the sampling provision of the law, and yet how the 
honest ginner is to be affected by it, no candid man who studies 
the requirement can possibly conceive. 

Surely the farmer, who must necessarily become the customer 
of the ginner, if the ginner is to have custom, is entitled to have 
his cotton honestly ginned, graded, and baled, and the gin samp- 
ling is the most vital thing recommended by government and 
other experts as the essential prerequisite to true grading. No 
honest ginner, so far as either the farmer or subsequent pur- 
chaser can understand, can reasonably object to certifying the 
samples as representative and fair, and that in the process of 
baling no foreign substance was introduced into the bale. The 
proper baling required by the law is of a certain class of bag- 

* Editor's Note: Since this paper was read the Texas Supreme Court 
has sustained the law in all its essentials. 



224 MARKETING AND FARM CREDITS 

ging, to cover the entire bale, and it is not possible to under- 
stand how the honest ginner is to be affected if he computes but 
the honest profit on the cost of such bagging against the owner 
of the cotton. However, in referring to the opposition of the 
ginners in part explanation of why the process of organization 
has not been more rapid, I am not called upon to argue the mer- 
its of the ginners' objections to the law. Whether tenable or 
not, these and other objections were urged, and finally embraced 
in a legal proceeding challenging the constitutionality of the law. 
It can be readily perceived that such opposition must exert a 
a great influence on the public mind. More than that, the bare 
possibility of the law being held defective by the courts was 
bound to have a great influence in restraining willing parties 
from embarking in a warehouse business that might be neutral- 
ized by the decision of the courts. 

Another real reason for objecting to the law may be imagined 
from the fact that the ginners could easily discern the loss of a 
hitherto source of profit in the success of the proposed system. 
If a scheme can be devised by which the distressed farmer can 
hold his cotton, he can, by the same means, hold his cottonseed. 
Now, many of the ginners of the state — not all of course — have 
found a source of great profit in acquiring the seed at distress 
prices, after the ginning. 

What the Cotton Buyer Thinks About It 

Opposition has been encountered from another equally in- 
terested class — the financially interested '^ cotton-buyer" — the 
gentleman who stands on the curb and depresses the price of 
the staple to the extent of his ability, while he slashes the bale 
right and left for samples on which to make his own grading 
or classification, which samples are rebaled and sold. This 
source of profit amounts to millions annually. The occupa- 
tion of this "middleman" will disappear with the perfection 
of a cooperative marketing system, and hence his opposition is 
neither remarkable nor surprising. 

By far the most influential factor in retarding the work of 
organization, as mentioned before, is the unlooked for high 
prices of cotton and the unpreeedentedly high prices of cotton- 
seed that have ruled since the passage of the law. They dis- 
counted the present necessity of the warehouse, so far at least 
as concerned the first marketings of cotton. Almost coincident 
with the opening of the new season the "upward movement" 



FRED W. DAVIS ' 225 

began, cotton soon soared to a compensatory price, and, by the 
time the season was half advanced it had almost touched, on 
many of the curbs of Texas the record figures of 1910. As a 
matter of fact, counting the phenomenal price he got for his 
cottonseed, the farmer realized on his output a better price 
than he got in 1910. So, at first blush it would appear that, 
so far as it might be used as a cotton marketing agency is con- 
cerned, the warehouse was little needed this year, and those 
interested in cotton took less interest in warehouse organiza- 
tion. 

Now, while undoubtedly the primary cause of high prices 
was the apparent certainty that the cotton yield would be cut 
to possibly low-water mark, I contend that the yet incom- 
pletely organized system bore a considerable part in their 
realization. As a means to that end it had most to do with 
creating the sentiment in favor of holding cotton for high 
prices, and this was bound to have a great effect upon indus- 
tries requiring cotton and those requiring the seed in the man- 
ufacture of by-products. To warehouse a considerable part of 
an undercrop would, perhaps, force fancy prices — something 
the manufacturer would avoid at all hazards. Accordingly I 
maintain that the warehouse system, by bearing a conspicuous 
part in forcing the at least compensatory price of cotton, has 
sustained its first test and demonstrated its utility as a market- 
ing agency. 

I have discussed the warehouse from the standpoint of cot- 
ton because, as I said, the board has confined its efforts prin- 
cipally to the handling of cotton. 

Is Cotton Marketing- Solved? 

Cotton should be the easiest of all crops to successfully 
market. When properly ginned and wrapped it is non-perish- 
able, if kept from the weather. Any amount of it can be put 
under one roof and it is not harmed either by excessive heat 
or excessive cold. It can therefore be put upon the market as 
the consuming world may demand. Another advantage in sell- 
ing cotton is the large unit value — the bale. One unit equals 
in value many units of corn and other agricultural commodi- 
ties. These advantages, coupled with the fact that it is the 
best collateral on earth, the South has but to find a means of 
connecting the abuses of the cotton trade to become the most 
favored country in the world. No other monej^ crop can com- 

15— M. F. C. 



226 MARKETING AND FARM CREDITS 

pare Avith it and it enters into all the fundaaneutal necessities 
and pleasures of life. It covers prince and pauper, feeds the 
hungry, heals the afflicted. It is very important as a food, 
medicine, clothing, photographing, printing. It is an absolute 
necessity in times of peace and war. This is the commodity in 
Avhich the South has a practical monopoly. AVe have but to 
reap what we sow and not leave it to others. 

I may add that though the warehouse is designed for the ac- 
commodation of other farm products, the tiine has not yet come 
to consider it in that connection, though the experience of this 
year proves that that time is nearer at hand than most people 
think. Though we have a small crop of cotton — but a big 
priced one — we have big crops of everything else, and diversi- 
lication has demonstrated that we can raise in prodigal abund- 
ance everything we have been importing from the other states — 
com, wheat, oats, barley — and many things most of the other 
states can not raise. "We have at last aroused our farmers to 
intensified and diversified farming, and the time is not far 
distant when with a perfected marketing system we will have 
all other states as far "skinned" in agriculture as we have in 
square miles, climates and varieties of soils and resources. 



WHAT THE NATIONAL FARMERS' UNION 

IS DOING 

Joe E. Edmunpsox 

National Lecturer, Texas Division of The Farmers' Educational and Co- 
operative Union of America 

It is a disappointment to me and I am sure it will be to others, 
that ^Ir. Barrett, the national president of our union, was un- 
able to be present. Mr. Barrett is more familiar with the na- 
tional aspect of the organization under discussion than I am. 
Perhaps I am more familiar than Mr. Barrett so far as the Texas 
field is concerned. I have a general knowledge of what the or- 
ganization has done and what it has tried to do and what it hopes 
to do throughout the country. Hence I would say that I feel 
I shall come far short, of discussing this subject as intelligently 
as Mi'. Barrett would do were he here. 

Before the Fanuei-s* Union came into existence as an organiza- 
tion the average farmer of the South was verj^ much dissatisfied 



JOE E. EDMUNDSON 227 

with his condition in life. He realized that he had not been 
getting the value of what he produced. He felt that he was not 
responsible for this condition and was much inclined to lay the 
blame at someone else's door. He realized that he and his 
family would have to labor the entire year to grow a crop of 
cotton, and that he would have to sell this cotton crop immedi- 
ately upon gathering and often at a very low price. In fact, 
this type of man was unable to supply himself and family with 
their necessary wants and comforts. His children were not be- 
ing educated as they should be and their prospects in life were 
none too good. Such a condition led to a deep seated discon- 
tent. The great majority of the farmers realized, however, that 
they needed some form of cooperation, and they began to realize 
that in order to do what they would have to do they must or- 
ganize themselves. This led to the birth of the Farmers ' Union. 

After this organization came into existence we began to study 
the real condition of the farmer. We found that the farmer him- 
self is perhaps as much to blame as any other individual. So 
the organization of the farmers was begun in order to protect 
them. 

We have undertaken not only to conduct ourselves as mem- 
bers of that organization along the better lines by using better 
methods in preparing our products for market, but we have un- 
dertaken to do something that would affect the market itself. 

Giving An Impetus to Standardization 

It was the Farmers' Union that first discussed and passed 
resolutions looking toward the proper handling of cotton. The 
cutting of the cotton bale is one of the evils in the South. This 
cutting is a great waste. It is the source of what is called in 
the South ''the town crop". The buyers take handfuls of the 
cotton for sampling and later resell these samples in bales. This 
loss alone must total a million dollars every year to the southern 
people. The practice of cutting the bale also leads to much 
damage in the quality of the cotton baled, and makes a very 
ugly appearing product when offered for sale. The Farmers^ 
Union brought this matter to the attention of the public and 
conducted an agitation for reform. We have now a law in 
Texas known as The Warehouse and Marketing Law, which 
looks toward a correction of the evil and provides for adequate 
storage, and also affords a bonded security basis for cotton loans. 



228 MARKETING AND FARM CREDITS 

AVe have also advocated the principle of a warehouse and con- 
tinual uiarketiuir of the cotton. AVe believe that is the only 
sensible way by which we could ever hope to have any say-so as 
to the price which cotton should bring. Take the world, and 
throw that commodity upon the world as a matter of fact, within 
3 or 4 montlis time and it is unnecessary for me to sjiy the 
effect of that upon the connuunity. Hence, we have gone 
into this. We are advocating the erection and operation of 
warehouses for storing the cotton pnxluet. in so .far as the South 
is concerned. We have a number of warehouses conducted civ 
operatively. and it is eminently satisfactory in many cases. 

A Voice: You have more tlian 100. 

Air. Ednuiudson : Up until a few were destroyed by fire, we 
had something over 100. 

Mr. McCarthy: Is that in Texas? 

Mr. Edntundson : Yes. that is in Texas. 

Mr. :\lc Ca rt liy : Y on ha d 2 1 1 . 

Mr. Ednmndsou: Y'es. but I am not so familiar with the 
other Southern States, and that is why I regretted the fact that 
Air. Barrett was not here to take up this matter with you him- 
self. 

Mr. McCarthy : Now, in Texas does the warehouse contribute 
as a warehouse to the central organization? 

Mr. Edmuudsou : The warehouse itself does not. but the 
members of the organization, and who constructed the ware- 
houses contribute to the Central Organization. 

Mr. McCai'thy : We have this ditHculty in Wisconsin, that 
after the organization forms a creamery, then the men in the 
creamery get away. They don't belong to the Central Organiza- 
tion. 

Air. Ednmndsou : I see. 

Air. AlcCarthy : Do you have that coudiiiou there? 

All'. Edmundson: Y'es, we have had some trouble in Texas. 
AYe have had souie diftieulty along that line, but not as nmch 
as you people have had. 

The Chairman: Alay I ask you if your organization has so- 
cial advantages as well as otherwise ? 

Air. Edumndson : Y'es. it has the social feature. 

The Chairman: I ask you that because the Grain Men's As- 
sociations have a tendency to be largely social. 

All". Edmundson : AYell, that is not the ease here. 



JOE E. EDMUNDSON 229^ 



Cotton Grading Schools 

Mr. McCartihy : ''l"'h(3re are a lot of farmers belong-ing to the 
organizations in Wisconsin for that purpose. Now you just 
rnentioruid that you had organized a school for grading cotton. 
Will you kindly tell us just how you organized that, and just 
how you worked it out. 'J'^here are lots of things in the stand- 
ardization and grading that our society has nx)t taken hold of 
yet. I wish you would tell me just exactly what you have done 
along that line. 

Mr. Edmundson: Attention has been called to the cotton 
growing centers. The average farmer of the South doesn't know, 
or didn't know anything about the grading of cotton, and hence 
the Farmers' Union conceived the idea while Mr. Davis was one 
of the officials at that time. That school was organized — it was 
decided upon by the state officials of the organization at that time. 

Th(!y had throughout the jurisdiction of the membership, sent 
word or let it be known that a cotton grading school would be con- 
ducted and taught in the city of Dallas, Texas, and that the tui- 
tion for the attendance would be $15, I believe. That tuition 
went into a fund to defray the expense of the school, and pay the 
teachers, and so forth, and purchase samples together with cov- 
ering all the exp(;nses incidental to the school, etc. There was 
the tuition of $15 each for each in attendance. 

We were gratified by the number in attendance, many of them 
were farmer boys and many of them almost middle aged, and 
some beyond that. 

Expansion of Instruction in Grades of Cotton 

There was so much satisfaction in that that the spirit grew and 
spread throughout the state and they found that one school could 
not very well meet the requirements and they commenced to estab- 
lish other schools and other schools were organized in the same 
manner. Others are being conducted at Paris, Texas, Big 
Springs, at Ft. Worth, Houston, and at various other places. 
They have employed extra teachers in order to be in a position to 
teach each one that attended that growing school. They found 
that $15 tuition was just about enough to cover the expenses, inci- 
dent to the school, and employ teachers, etc. 

This having met with considerable approval, and the general 
public beginning to see the necessity of it, the colleges took up the 



230 MARKETING AND FARM CREDITS 

teaching of the grading of the cotton, in the schools, which had 
some effect. 

However, the Farmers' Union, I believe, if I am not mistaken, 
was the first organization, the first body of men that ever under- 
took anything of that kind. 

Mr. McCarthy : What year did you start that ? 

Mr. Edmundson : The year, 1905. 

Mr. McCarthy : And how long a session each year. 

Mr. Edmundson : They generally ran in for about 60 days, I 
believe. 

Mr. McCarthy : Sixty days, did you say ? 

Mr. Edmundson: Yes, 60 days. 

Mr. Davis : You might also state, in that connection that the 
Union was instrumental in securing the grading of the cotton. 

Mr. Edmundson: Yes. I want to state that the Parmer's 
Union was really the pioneer or one of the pioneers in bringing 
about the influence that induced the United States Department 
of Agriculture to establish those samples of grading. 

Mr. Davis : That thought came about in our schools, you know. 

Mr. Edmundson : Yes. It came out in our schools. 

Cooperative Gins 

Mr. McCarthy : Mr. Ousley mentioned the fact that there was 
some cooperative ginning? 

Mr. Edmundson : Oh yes, sir. We have some cooperative gins 
there. 

Mr. Ousley : In Ellis county, to which I alluded, there are 27 
cooperative gins, owned by these people. They make very hand- 
some profits and are owned by successful and thrifty business men, 
and they are men that belong to the Farmers ' Union — several of 
them, and others that are not members of the Union. There arc 
Farmers ' Union gins and there are farmers ' gins that are not 
members of the Union. 

Mr. Davis : Now, in 1906 or 1907 one company came to the ex- 
ecutive committee of the Farmers ' Union and they understood that 
we were already conducting cooperative gins. They proposed 
to take one of our men out of the business department and pay him 
and gave a certain per cent to the organization with the under- 
standing that they would furnish the gin at the same price as they 
sold it to the others. And that was the rule for 2 years. 

Mr. Edmundson: This had its organization after the Union 
was organized, and after they had organized that department. 



JOE E. EDMUNDSON 231 

Now, Col. Ousley, they have a number of these in the western part 
of Texas. 

Mr. Ousley : And you might add, further, that there are somo 
cooperative cotton oil mills. 

Mr. Edmundson: Yes, that is true. At Wichita Falls the 
Farmers ' Union owns cooperatively the gin and the oil mill, and 
all those things. 

Mr. McCarthy : Are there any other attempts of your organi- 
zation to teach the grading of their products ? 

Mr. Edmundson : There has been but very little done in any 
other line. This is simply because cotton is the principal crop^ 
In fact, it is about the only crop that the farmer grows for grading 
purposes. 

Mr. Ousley : I have in my department an appropriation of 
$2,000 a year for that purpose. It is a very modest sum, for that 
purpose ; but we use what we have. 

Purchasing Supplies Jointly 

Mr. McCarthy : Now, I would like to ask whether the local or- 
ganizations, are doing anything in furnishing the farmers with 
their agricultural requirements, the machinery and the seed, and 
the fertilizer, etc., necessary to get that crop? I would take it 
from what I have learned that the farmer is a manufacturer. If 
he is a manufacturer, he is entitled to buy his agricultural re- 
quirements at the wlholesale price. I simply want to know 
whether you have gone into that at all or not. 

Mr. Edmundson : In some of the localities, the organization 
has taken that matter up somewhat, but as a general proposition, 
they contented themselves with discussing the marketing side, 
because that was the big problem and they have not solved it yet. 

Mr. McCarthy : But, how would you say about this, — that if 
that is the fair propositiop and we are willing to accept that, isn 't 
a dollar saved and in that way just as good as a dollar saved in 
any other way? 

Mr. Edmundson : Absolutely. 

Mr. McCarthy : It is just as good and it is worth one hundred 
cents on the dollar? 

Mr. Edmundson: Yes. There is still a great field to be 
worked on that line. 

Mr. Ousley: In the Southeast, the Farmers' Union principle 
activity is adapted to fertilizer. 



232 MARKETING AND FARM CREDITS 

Mr. Edmundsou : It is also true with a good many others who 
are not of the Farmers' Union. I would like to make a remark 
in that connection. It is a mere matter of opinion but I think 
it worth while to state that there is a good deal of this education. 
I did not think that the farmer is entitled to wholesale prices in 
this way. I simply raise the question as to whether we had bet- 
ter discuss that. 

I\Ir. Lyman : You arouse antagonism, of course. 

Mr. Ousley: Yes you do. I have not encouraged that.' I 
thought it best to promote first, the selling end of it with the 
farmer, and then, when we get to that, it will be all right. 

Mr. Slocum (Mchigan). Twenty one years ago we organized 
a society in Michigan, and today we have 7,000 members in that 
organization. Now, I want to say that we make a line of de- 
marcation between the men — between the farmer and the others. 

The elevator and all that pertains to the farm product belongs 
to the farmer. We have, in the past 8 years, divided our work. 
We have devoted our work to solving the problem of the farmers 
of Michigan, This last year, we had over $8,000,000 worth of 
product. Now, your question that you ask, with reference to 
fertilizer, — I think you will find that Armour & Company, here 
in Chicago, will tell you that Michigan is the largest consumer of 
fertilizer that they have. It is all made by our own formulas. 

Several years ago we got a law through the legislature to estab- 
lish a faetoiy at Jackson, and we have made the Jackson state 
prison self-sustaining. This last year they have turned over a 
profit and it has paid all its own expenses. 

Everything that goes to the farm production should be bought 
in large lots by the farmers themselves, and as the little town 
learns that the town can successfully do business — as it learns 
that it can be successful only so long as the farmers who farm are 
doing so at a profit, they will join with us. 

The Chairman : How did you find the fertilizer men taking 
up that proposition? 

Mr. Slocum : How did we find it ? 

The Chairman : Yes, are they antagonistic to it ? 

Mr. Slocum : Not at all. When they begin to learn that you 
can give them a bigger order than the other fellows. 

The Chairman : I see. 

Mr. Slocum : We buy from Armour & Company and have each 
our own brands. I think now, — I presume that we have 25 ferti- 



JOE E. EDMUNDSON 233: 

lizer men from all over the United States coming to us to get our 
business, and I want to say that they are glad to get it. 

The Chairman : Well, you buy_ the chemicals and manufac- 
ture it according to your own ideas and according to your own 
tormula. 

Mr. Slocum : Yes, as to the requirements and needs of our 
soil. Different sections need different stuff, of course. 

Mr. Black: They speak of owning these gins cooperatively. 
Do they mean that strictly, or is that a stock word ? 

Mr. Ousley : Not altogether, Mr. Black. A few of these ware- 
houses and gins are on a mutual plan. Many of those are nov\r, 
however. They are cooperative, only in the sense of there being 
groups of farmers working together. 

Mr. Black : I want to say one word more. I have been a 
member of the Farmers' Union, and we are interested in the buy- 
ing of sacks. We probably buy a million sacks a year. We pro- 
ceed td have a pool at about the time we want to buy, and each 
one puts down absolutely what he will take, and we get our sacks 
at a remarkably low figure, just by doing that. 

Now I see that that cotton is put up in Jute there, and the presi- 
dent of the State Farmers ' Union, with two of the executive com- 
mittee, went down to Texas for the purpose of investigating cot- 
ton bags, and with a view to putting our corn in cotton bags, in- 
stead of jute, and now I am surprised to see the cotton bales put 
up in these jute bags. 

Mr. Ousley : Well, jute is cheaper. 

Mr. Ousley : Well, that has been agitated a great deal. The 
use of the cotton bag. Under the Act, the cotton bag is prescribed. 
That was put in there so that if the opportunity ever presented 
itself, when it seemed possible to use cotton bagging, it would be 
done, but this year they held cotton bagging at a higher value than 
at others. Usually, heretofore, they have been sold at around 
three or four, when cotton was worth twelve. All the low grade 
cotton came into demand this year. 



234 MARKETING AND FARM CREDITS 



WAREHOUSES AS AFFECTING THE PRO- 
DUCTION, FINANCING AND MARKET- 
ING OF COTTON 

Ernest ]\1 Loeb 

President of The Board of Commissioners of The Port of 
New Orleans 

Of the agricultural products of the United States, cotton ranks 
•second in value, being exceeded only by the value of the corn 
crop. Corn is produced in every state of the Union while cot- 
ton is confined, with the exception of a very few bales, to the 
13 Southern states. The center of this production in the 
United States is now near the point of the state boundaries of 
the states of Louisiana, Mississippi and Arkansas, located on the 
Mississippi River, approximately 225 miles in a radial line from 
New Orleans. Analogous distances of Galveston and Savannah 
are respectively 360 and 575 miles. 

In the process of marketing of cotton, the necessity for proper 
warehouse facilities begins from the time the lint is picked in 
the field and continues until it is delivered to the mill. Bulle- 
tin No. 227 of the United States Department of Agriculture esti- 
mates that in normal years there is a loss of from $30,000,000 
to $75,000,000 from what is generally, though incorrectly, called 
"Country Damage", from which it will be seen that there is an 
ample need of adequate warehousing system for cotton similar to 
the present warehouses or elevators used in the marketing of 
the enormous grain crops of the country. In any system of 
warehousing, the producer is concerned only in the physical pro- 
tection of the cotton until it is delivered at the primary market, 
usually, as in the ease of cotton, a concentration and classifica- 
tion point. 

Up to this time the cotton has been under the control of the 
farmer and in spite of the fact that the southern cotton farmer 
has a virtual monopoly in the production of the great staple ne- 
cessity, which clothes a large part of the world, yet he has not 
profited by such situation as other monopolists do, but has on 
the contrary, managed to eke out of his monopoly a precarious 
and dependent living. The faulty marketing conditions under 
which the farmers have been laboring are that the crop which 



ERNEST M. LOEB 235 

1;he mills require 12 months to consume, is sold by the producer 
within a few months. 

It is quite evident that if cotton continues to be forced on 
the market within a comparatively few months of each year, as 
at present there will not only be a material loss to the farmer, 
but the various branches of trade must be taxed in the effort to 
handle the crop. 

Why Cotton Should Be Warehoused 

It is particularly true that many of the farmers as well as 
dealers, suffer a great loss because they do not understand the 
importance of protecting and conserving cotton while it is wait- 
ing a fair market. Corn, wheat, hay, sugar, tobacco and all 
other products of the farm, are carefully and systematiclly 
prepared, inspected, graded and certified in accordance with es- 
tablished rules based upon sound and economic business methods. 

No agricultural product is less subject to deterioration and 
damage from exposure to the elements than cotton. As a di- 
rect result of these facts, no similar product is less protected 
from damage in its movement from producer to consumer. The 
enormous economic loss resulting to the Southern States from the 
present methods of handling cotton is receiving the attention not 
only of the farmers, the men of the cotton trade in general and 
the bankers, but of the state governments. 

A number of the Southern States have recently passed or are 
about to pass, warehousing laws designed to protect cotton from 
physical damage and at the same time to so safe-guard the cot- 
ton so as to render it sound collateral upon which the farmer can 
obtain money at a low interest rate. 

What Warehousing: Might Do for Cotton 

The value of a system of warehouses would have been ines- 
timable during the cotton panic of last year. As has been indi- 
cated, the functions of a warehouse are : 

First : It offers temporary storage facilities when the person 
owning the product is not in a position to store it himself. In 
the cotton business in normal years, this will cover the period 
from the time the cotton is ginned until it is sold by the farmer. 
It also provides the cotton dealer with a place in which to store 
his cotton from the time it is purchased until it is shipped. 



236 MARKETING AND FARM CREDITS 

Second: The warehouse should furnish the owner of the- 
stored product a negotiable receipt. This receipt should show 
definitely what product is stored, the ownership, the amount of 
goods, the kind or grade, the condition, and the location of the 
warehouse. It should also show that the stored products are 
properly protected by insiu-anee. The legal holder of such a 
receipt would be protected as fully as if he had the goods securely 
locked in his own vault. 

Third: The warehouse provides a reservoir for surplus dur- 
ing years of over-production or ^ihen market conditions are very 
unsatisfactory. When there is a surplus of any product there 
should be some way of saving it until there is a better demand 
for it. 

In connection with the value of a negotiable warehouse receipt 
it should be said that proper state laws covering the issuance of 
the receipts are necessary. In order to be of greatest value the 
warehouse receipts should show beyond question the ownership 
of the product stored, and this accuracy cannot be accomplished 
unless the states in which the warehouse companies operate have 
laws that properly guard the issuance of receipts. The laws of 
Louisiana and the form of cotton warehouse receipt issued by 
this state, embody these important requirements. 

If the laAvs of the state in which the warehouse is located are 
such as to throw any cloud upon the title of the goods covered 
by the receipt, the receipt immediately becomes almost worth- 
less as collateral and defeats any efforts to borrow money at 
cheap rates from outside sources. 

In addition to enacting such laws as will guarantee effectively 
the integrity of warehouse receipts, it seems advisable for all 
states to adopt a law of uniform warehouse receipts. This law 
is now in effect in many of the states and has been approved- 
by the American Warehousemen's Association, and the Ameri- 
can Bankers' Association, and the American Bar Association, 
as being the best form in which laws can be made to protect 
both the owner of the goods and the lender of the *money 
against the receipts covering such goods. 

Why the Faxmer Must SeU 

Generally when the farmer has gathered his crop, it becomes 
necessary for him to turn it into money in order to 'pay his 
merchants who have probably advanced him on the crop, and 
who in turn have their obligations to fulfill. To obtain such 



ERNEST M. LOEB 237 

necessary funds the cotton or a sufficient amount, must either 
be utilized as the basis of a loan or else be sold. The country 
today has generally no adequate and inexpensive warehousing 
facilities which issue dependable or widely current certificates 
of ownership. The farmer is therefore not able to realize the 
necessary funds with the cotton as a basis for security, or if 
able to do so, he has to pay so high a rate of charges and in- 
terest that the transaction is unprofitable. The result is that 
during the fall months when the farmer is compelled to sell his 
cotton, the supply exceeds the demand and as a result the price 
usually falls below the real value of the commodity. 

As has been pointed out, the remedy for this condition is a 
system of inexpensive warehouses operating under proper state 
laws, guaranteeing the certificate of ownership and if neces- 
sary, guaranteeing the grade and weight of each individual 
bale, as shown on the receipt. With such a receipt, the farmer 
can, with the impetus which the federal reserve law has given 
to banking facilities throughout the South and elsewhere, bor- 
row money necessary to meet his obligations, and, equally im- 
portant, borrow it at a low interest rate. 

While cotton is recognized as the best collateral, it will not 
be accepted by business men except under proper conditions. 
The bankers throughout the South generally, state definitely 
that they will advance funds on it readily and that it is pre- 
ferred to real estate as security. The difficulty with the farmer 
is that with the present credit sj^stem under Avhich he operates, 
he has mortgaged his crop before it is made, and usually at 
exorbitant rates of interest, not only for the money advanced 
but for supplies and material necessary in the making of the 
crop. 

While it is difficult to remedy this situation, it would be 
greatly improved by the establishing of a system of warehouses 
and encouraging farmers to store such cotton as is not abso- 
lutely necessary to settle their accounts. 

Unfortunately, the merchant is almost as helpless as the 
farmer. He advances supplies while expecting cotton to bring 
a fairly good price. In most cases he has purchased his stock 
on credit and cannot meet his own obligations until the farm- 
ers'^ accounts are paid. 

The effect of these conditions and the lack of warehousing 
facilities was reflected in the price of cotton during the latter 
fpart of 1914 when many farmers refused to sell their cotton 
with the result that the merchants, with the unusually low 



238 MARKETING AND FARM CREDITS 

price prevailing, could not afford to close out the farmer to 
whom he advanced, for the reason that if the cotton was 
thrown on the market it would not have brought enough to 
settle his account. 

Whait Louisiana Has Done 

The state of Louisiana while it has not as yet passed a public 
warehouse law, has, however, provided through an agency of 
the state, — the Board of Commissioners of the Port of New 
Orleans,— at an expenditure of approximately $3,500,000, a 
state-owned and operated warehouse, which under a constitu- 
tional amendment to the laws of the state, can issue state re- 
ceipts for the cotton stored and which upon the payment of a 
slight fee can be certified to as to condition, grade and weight 
of the cotton, by the New Orleans Cotton Exchange. 

This warehouse is available to the farmers, not only of Louis- 
iana, but due to its advantageous location at the second port 
of the United States, offers inducements which more than com- 
pensate the slight increase in transportation costs that might 
be due to equivalent costs from any location to a nearer port. 

In any warehouse system storage costs must be a minimum ;■ 
insurance costs as low as consistent with economy of construc- 
tion; the financial facilities and responsibility of the ware- 
houses such that money can be obtained on the cotton at low 
interest rates. 

Owing to the permanency of production and consumption, 
locations, as indicated by the recent study of the cotton busi- 
ness made in connection with the erection of the publicly ownecf 
and operated modern warehouse at New Orleans, it is conser- 
vative to assume that the center of gravity of the business as a 
whole will not materially change, except as to location of mar- 
keting and routes of transportation. Because of the ramifica- 
tions of the cotton and other market connections of New Or- 
leans throughout the Mississippi valley, and abroad, it be- 
comes possible to handle and dispose of a larger number of 
grades of cotton in the New Orleans market, than in other 
markets of the Gulf coast and interior points. 

Manufacturing: Turned Southward 

The tendency of cotton manufacture in the United States is. 
toward the South, — in the world it is toward Japan, China and 
India. Such changes as have occurred or are now in process. 



iERNEST M. LOEB 239 

are strengthening New Orleans both as a spot and future cot- 
ton market. Unmanufactured cotton is the largest item of ex- 
port of the United States, amounting in value for the year end- 
ing June 30th, 1914, to $610,475,301. This merchandise now 
moves over routes of least resistance, principally along the 
North and South lines of transportation, terminating at the 
port cities such as New Orleans, Galveston and Savannah. 

In the present general routine of marketing cotton, the ten- 
dency is to concentrate cotton by buyers in the interior who 
protect themselves in the future markets, such as New Orleans 
and Liverpool, and ship to the manufacturer on a through bill 
of lading. The future contract, however, protects the buyer 
in only one grade. A guaranteed state warehouse receipt not 
only enables the planter, buyer or manufacturer who owns the 
cotton to hold at the best strategic point for world marketing 
and finance his requirements at the lowest market rates for 
money, but gives him a speculative interest in any grade to 
which his cotton belongs. Cotton is as nearly non-perishable 
as any agricultural crop. By eliminating financial necessity on 
the part of the planter through a reduction of approximately 
331/^ per cent in rates paid for monej'', there remains no reason 
for hurried, uneconomical marketing. 

As mentioned elsewhere. New Orleans should, after the be- 
ginning of operation of the warehouse plant and the Panama 
Canal, become the greatest spot cotton market of the world 
because of its strategic location in relation to the world's prin- 
cipal points of consumption, the Continent, the United King- 
dom, the Southeastern Coast States, New England, Japan and 
China. 

Simultaneously with the adoption of western methods, China 
probably will, because of the qualities of its labor, become one 
of the greatest cotton manufacturing countries. Considering 
Japan and China as cotton manufacturing countries, through 
the Panama Canal, New Orleans may become the geographical 
center for cotton distribution to manufacturers. 

Changing the World Center of Cotton Marketing 

In establishing the publicly owned and operated warehouses 
in the state of Louisiana, the Board of Commissioners of the 
Port of New Orleans among other aims had in view to make 
New Orleans a market of deposit similar in characteristics to 
the representative ports of Europe, — London, Hamburg and 



i:40 MARKETING AND FARM CREDITS 

Liverpool. New Orleans can sell to any eonsnnunir market in 
the world, it is an original port of shipment, — Liverpool, Lou- 
don. Hamburg and Havre are secondary ports of shipment and 
eaunot sell to each other or Amerieau mills without incurring 
an eeouomie loss. 

Because of the etiieieney resulting from consolidation and 
more complete organization of forces, the tendency of present 
ocean commerce is to use the fewest ports practicable to the 
exclusion or curtailment of other ports. This is exemplified 
in the relative volumes of business of the ports of New York. 
Boston, Philadelphia and Baltimore. A return of the approxi- 
mate equal division of commerce between ports in the same 
general section, is not to be anticipated. If present port con- 
centration in general localities is to continue, it is reasonable 
to assume that the greatest export and import ports of the 
Vnited States will be New York. New Orleans and San Fran- 
ciso, serving respectively the Atlantic, Gulf and Pacitic Coasts 
of the United States in export and import commerce. Recent 
port development in the United States has been stimulated by : 

1. The demonstrated economics resulting from European 
port and harbor development which must, in competition, be 
established in the United States. 

2. The construction of harbor facilities in advance of trade. 

0. Competition between trunk line railroad systems neces- 
sitating individually owned terminals. 

■i. Probable increase in ocean transportation through the 
opening of the Panama Canal. 

5. The invention, improvement and use of freight handling 
machinery. 

The board of commissioners of the Port of New Orleans in 
carrying into actual physical etfeet the will of the people of 
Louisiana as expressed in acts of the state legislature and later 
ratified by vote of the people as an amendment to the Contitu- 
tion, instructed their engineers to so design and equip the 
publicly owned and operated cotton warehouses and terminal: 

1. That the construction under the $8,000,000 expenditure 
available be a part of a comprehensive plan which could in the 
future be enlarged in storage capacity, terminal trackage and 
wharf area- 

2. That such structures be at a minimum cost per bale of 
storage capacity commensurate with permanent construction, 
insuring the greatest possible protection from fire. 



ERNEST M. LOBB 241 

3. That the structures be so designed as to p<irmit the in- 
stallation of economical mechanical conveying equipment with 
its consequent reduction in labor costs. 

4. That the structures be such as to enable the x>lant to be 
operated at maximum earning capacity and therefore when 
not required for cotton to provide for the storage of coffee, 
sugar, sisal, rice, jute, tobacco and other standard package 
commodities. 

5. That the structures and appliances be such as to permit 
of the receipt and handling of cotton and other commodities 
from vessels and for transfer to freight cars, as well as the re- 
ceipt and handling of cotton and other commodities from 
freight cars and the delivery to vessels, thus adapting the plant 
to a two-way operation. 

6. That the plant be so designed as to be adaptable both to 
the present method's of inspecting, weighing and classing of 
cotton and such new methods of modifications as may be in- 
stituted, based upon the recommendations of the cotton ex- 
change and requirements of the cotton trade. 

7. That the compartments be of such dimensions and the 
appliances of such design that flat as well as compressed cot- 
ton may be handled and stored economically. 

8. That the plant be arranged for efficient handling of fac- 
tor's cotton, f. 0. b. cotton and through cotton. 

9. That the plant be such as to serve the port of New Or- 
leans as a deposit market for the cotton supply of Europe as 
well as the United States. 

The operation of the public cotton warehouses and terminal 
will not in itself solve the marketing problem for the entire 
cotton section. It will materially assist the farmer in enabling 
him to obtain cheaper money, the banker in insuring the ab- 
solute probity of security for his money and the merchant in 
reducing the cost of handling. 

16— M. F. c. 



ELEVATORS— LOCAL AND TERMINAL 



' ADVANTAGES OF A STATE-LICENSED 
WAREHOUSE SYSTEM 

J. C. F. Merrill, 
Secretary, Chicago Board of Trade, Chicago, 111. 

Tihe question of goverunient owned storage has been promi- 
nently before the public of late, especially that for the relief 
of the cotton states. It is commonly desired by those sections 
of our country financially unable to provide it for themselves. 

"When financial stress occurs and becomes general, as in case 
of panics, collateral ordinarily entirely acceptable to bankers 
is not infrequently refused, because such loans would but rep- 
resent investment of their capital for the period covered by the 
obligation they secure. 

I once heard President Forgan of our City National Bank say 
that he would rather lend money on wheat collateral, if the 
wheat was hedged by a time contract, than lend it on govern- 
ment bonds ; that, in his experience, he had sold wheat for for- 
eign gold when he could not sell government bonds. 

Thus was made clear the fact that principal food necessaries, 
susceptible of safe storage, are more liquid than the most stable 
of securities. The inexorable need of food gives it a market 
which stocks and bonds do not possess. 

Before the question of government owned and government 
operated storage for soil products was even thought to be pos- 
sible, the advantages of state-controlled storage, operated by- 
individuals, was recognized by a galaxy of men whose ability 
in vital and fundamental service in this and in other respects: 
to Chicago in its infancy, has placed the city under everlasting- 
obligations to them. 

In 1823 Chicago had a population of 65 or 70. Twenty-five 
years later it had a Board of Trade, and 22 years still later,, 
it had state-controlled public elevators. Thus, not only were 
the people of Illinois benefited, but those of the entire Missis- 
sippi river and Missouri river valleys tributary to it likewise 
were given equal facilities at its great andl growing market 
place — Chicago. 



:24ti MARKKTING AND FAUM CREDITS 

Illinois Leads the Way 

The present Constitution of the st^te of Illinois was adopted 
by vote of the people in 1870. The thirteenth artieU^ of the 
"Constitution is as follows : 

iWaivhouses* See. I. All elevatoi"s \or storehouses 
where grain or other property is stored for a eonipensation. 
whether the property stored be kept separate or not. are 
declared to be public warehouses. 

Sec. 2. The owner, lessee, or manager of each and every 
pnfclie warehouse situated in any town or city of not less 
than 100.000 inhabitants, shall make weekly statements un- 
• der oath, before some ot^eer to be designated by law, and 
keep the same posted in some eonspieuous place, in the of- 
iice of such warehouse, and shall also tile a copy for public 
.examination in such place as shall be designated by law, 
which statement shall correctly set forth the amount and 
grade of each and every kind of grain in such warehouse, 
together with such other property as may be stored therein, 
and Avhat warehouse receipts have been issued, and are. at 
the time of making such statement outstanding therefor: 
and shall, on the copy posted m the warehouse, note daily 
such changes as may be made in the quantity and grade of 
grain in such warehouse; and the ditferent grades of grain 
shipped in separate lots shall not be mixed with inferior or 
suvHn'ior grades without the consent of the owner or con- 
:signee thereof. 

Sec. o. The owners of property stored in any warehouse, 
or holder of a receipt for the sanu\ shall always be at lib- 
>erty to examine such property stored, and all the books and 
records of the warehouse in regard to such property. 

Sec. 4. All railroad companies and other common cnr- 
riei'S on railroads shall weigh or measure grain at points 
nvhere it is shipped, and receipt for the full amount, and 
shall he responsible for the delivery of such amount to the 
owner or consignee thereof, at the place of destination. 

Sec. 5. All railroad companies receiving and transport- 
ing grain in bulk or otherwise shall deliver the same to any 
consignee thereof, or any elevator, or public warehouse to 
which it may be consigned, provided such consignee or the 
elevator or public warehouse can be reached by any ti*ack 
■owned, leased or used, or which can be used, by such rail- 
road companies: and all railroad companies shall permit 



J. C. F. MERRILL 247 

connections to be made with their tracks, so that any such 
consignee, and any public warehouse, coal banlc or coal 
yard, may be reached by the cars on said railroad. 

Sec, 6. It shall be the duty of the General Assembly to 
pass all necessary laws to prevent the issue of false and 
fraudulent warehouse receipts, and to give full effect to this 
article of the Constitution, which shall be liberally con- 
strued so as to protect producers and shippers. And the 
enumeration of the remedies herein named shall not be con- 
strued to deny to the General Assembly the power to pre- 
scribe by law such other and further remedies as may be 
found expedient, or to deprive any person of existing com- 
mon law remedies. 

Sec. 7. The General Assembly shall pass laws for the in- 
spection of grain, for the protection of producers, shippers 
and receivers of grain and produce. 

The general assembly in obedience to this mandate of the 
people in 1871 enacted — "An act to regulate public warehouses 
and the warehousing and inspection of grain, and to give effect 
to Article XIII of the Constitution of this State" — In force 
July 1, 1871. 

This law divides grain elevators into Classes A, B and C. 
Class A houses are limited to cities of not less than 100,000. 
Class B embraces all other houses in which grain is stored in 
bulk in which grain of different owners is mixed together. 

Public warehouses of Class C, embrace all other places 
where property of any kind is stored for a consideration. 

Arranging' For Grain Inspection 

The law provides that public warehousemen must advertise 
their rates of storage during first week of January, and that 
such rates so advertised may not be increased during the year. 
Under the provisions of the law such storage must be licensed 
by the State Public Utilities Commission of Illinois. They must 
also file a bond with the commission to be approved by it in a 
penal sura to be fixed by the commission. The law forbids dis- 
crimination and provides for the mixing of grain of the same 
grade, unless a special bin is arranged for by the owner of the 
gra,in. 

The same law in obedience to the same mandate provides for 
a state grain inspection department. 



248 MARKETING AND FARM CREDITS 

Section 1-1 ol the law provides that it shall be the duty of the 
governor to appoint, by and mth the advice of the senate, a 
chief inspector of grain for the state. The said chief inspector 
shall have the power to appoint, upon the approval of the utili- 
ties commission, such suitable persons in sufficient number to act 
as deputy inspectors as may be necessary to properly carry on 
the business of the department. 

The law also provides for the appointment of a warehouse reg- 
istrar for the purpose of registering receipts issued by public 
elevators and concelling them when presented for cancellation 
preparatory to withdrawal of the grain from store ; also, keeping 
a record of the same, thus officially showing the quantity in store. 

Numerous minor yet important conditions are named in the 
law and in a supplemental "Act" in regard to warehouse re- 
ceipts, in force July 1, 1-907. 

This law, enacted nearly 45 years ago and in force during all 
of this time, placed the state of Illinois far in the lead of every 
other state. It has been substantially copied in some respects 
by other states, but none of them has laws so far reaching and 
complete. A portion of it, that part relating to common car- 
riers, was the substance of an interstate commerce act. When 
that law was enacted by Congress, this law had been in use more 
than 20 years and had passed the experimental stage. It was 
argued that what had proven good for the commonwealth of Illi- 
nois, would likewise be good for the nation. 

Public storage under this act has ranged in total capacity in 
the city of Chicago up to approximately 50,000,000 bushels. It 
is and from the first has been open to the public impartially and 
the proprietors under the law, as a matter of sound public pol- 
icy, as construed by the Illinois supreme court, may not store 
their own grain in mixture with that of the public. Its maxi- 
mum efficiency was, when the farmers were less able financially 
than now to hold their grain. They then sold freely immediately 
it could be delivered. At that time, prior to a decade and a half 
ago, the 50 millions capacity was, at times, scarcely enough. 
Now with twice the production in the territory tributary to this 
market, 14 millions answers the requirements reasonably well. 
This is in obedience to a prime order of nature, i. e. a movement 
along the lines of least resistance. 

At rates of storage in effect now and for some years past, the 
total yearly charge, should any grain remain in storage continu- 
uously for the year, amounts to 121/0 cents per bushel. Twenty 



J. C. F. MERRILL, 249 

years ago when rates were higher it amounted to 18 cents per 
bushel. Against this, on the farm the storage charge is nil. 
Crib and other farm storage costs little, if the life of the stor- 
age be considered and it is worth nothing while empty. Thus, 
the farmer has the advantage to the extent of this storage cost.. 
Those to whom he sells in central markets can not escape the 
public elevator charge in holding surplus grain. 

What State-Licensed System Has Done 

The advantages of a state-licensed warehouse system to the 
great public of that section of our fertile Mississippi valley 
tributary to Chicago have long been demonstrated. It has 
served a large and general purpose; it has enabled the public 
to store grain safely in the care of a licensed and bonded cus- 
todian. It has facilitated the accumulating of round lots for 
lake shipments. It has provided means of doing this during 
months of closed lake transportation to gain the benefits of" 
lower water rates. It has also served those who have desired 
to place their grain where it could be utilized as highly ac-. 
ceptable collateral to bank loans. As against government 
owned storage it has saved the people from paternalism in gov-- 
ernment, preserving individual initiative thereby fostering the- 
creative in men and likewise tending to exclude dependence, 
thus preserving self-respect. True helpfulness resides in help- 
ing others to help themselves and not in paternalistic or gratui- 
tous assistance. 

State-licensed elevators have retained the benefits of com- 
petition in fixing their charges, storage being a commodity. 
At the same time they have protected the public against the- 
exactions of unfair rates besides possible loss of the property^ 
through utilizing privately owned and operated storage. 



250 MARKETING AND FARM CREDITS 



THE FARMERS' ELEVATOR MOVEMENT IN 
THE UNITED STATES 

H. W. Danforth 
President, The National Council of Farmers' Cooperative Association 

Today the farmer fiuds himself in the uniqiie positiou of 
payino- exorbitant retail prices for everything he buys, and re- 
ceiving wholesale prices for everything he sells : of selling his 
products in a market open to the competition of the world and 
buying what he needs in a market protected against outside 
competition. "When land was cheap and the soil rich in plant 
food, farming was a simple process requiring fortitude, soli- 
tude, privation and hard manual labor. They were generally 
very poor and unable to finance their own farm operations, let 
alone the marketing end of them. The farmer paid little atten- 
tion to governmental matters. 

For over a century the United States government has fos- 
tered, nursed, and granted special privileges to manufacturing 
interests with practically no concessions to the a-gricultural in- 
terests of the country. Conditions in this day and age seem to 
suggest that fighting is essential to preservation of one's own, 
and yet if one loses in the struggle, he may be worse off than 
if he had passively submitted to the demands of the stronger. 
AYhen people are doing well enough, that is when they are not 
conscious of unjust exactions, and are making ends meet, they 
are not likely to be greatly concerned about the other elements 
of society who are reaping profits by means of legislative fav- 
ors. In the present state of society, and educated as it has 
been for so long a time, to believe that bounties and taxation 
for the profit of a class is beneficial to the whole of society, it 
will be necessary to organize and to educate oui*selves for pro- 
tection against the rapacity of the organized interests that at 
present dictate and profit by legislation. 

That the farmer has lagged behind in the great industrial 
warfare, is undisputed. This is due in great jiart to the nature 
of his business. He is a great individualist and has had little 
opportunity or time to study the complicated economic prob- 
lems involved in marketing. 



H. W. DANFORTH 251 

Had it not been possible for the farmers to move west and 
take up new land when he had worn out and depleted the fer- 
tility of the old farm, he would have long ago succumbed to 
the inevitable, but now that the tide of emigration has reached 
the Pacific ocean, and he can not leave the worn out farm and 
move on to virgin land, he has discovered that he must now 
turn back and build up the old farm. He finds that it is no 
longer easy to make them yield a living equal to the needs of 
intelligent families. Over such a community general discour- 
agement has begun to brood. For several years we have seen 
a movement towards the city. Statistics show that the urban 
population is increasing much faster than the rural population, 
and the last eerisus shows less than 50 per cent of the people of 
the United States are living on the farms. The old people who 
cannot get away, settled down to end their days, as economically 
as possible, on their savings. 

In recent years, through the excellent work of the state imi- 
versities and the United States department of agriculture, the 
farmer is fast becoming an efficient producer. At the same 
time he realizes that to produce fine crops and let gamblers and 
speculators fix the price and get all the profits, is certain in 
the end to bring upon him crushing defeat. 

Marketing a Great and Serious Problem 

One of the great problems that the farmer finds it necessary 
to meet today has to do with the marketing of his crops. 
About the year 1888 or 1889, the farmer first began to realize 
that he was being robbed of his just profits through the exac- 
tions of the grain trust, the lumber trust, the coal trust and 
other combinations with which he had to transact business. 
Several of the large terminal elevators operating throughout 
the grain belt had purchased practically all the country ele- 
vators, and had organized one of the greatest monopolies in 
existence. The prices to be paid for grain were determined at 
headquarters and telegraphed to each of the small country 
elevators. The prices so fixed varied any where from 5 to 10 
cents less than the grain was actually worth. 

It was this condition that prompted about 100 farmers in the 
little town of Rockwell, Iowa, in March, 1889, to meet and dis- 
cuss their troubles. The result of this meeting was to organize 
a company and raise sufficient money to purchase or erect their 
oWn elevator. This was soon aceomplisihed and the company 



lio*^ 



MARKETING AND FARM CREDITS 



began business. Following the example of the Rockwell com- 
pany, a number of new cooperative companies sprang up over 
the state until in 1904, fifteen yeai*s later, there were about 30 
of them in Iowa. Likewise about 20 companies had been organ- 
ized in Illinois. Every one of these companies met with strong 
and determined opposition, not only from the grain trust, but 
the lumber trust, the coal trust, the railroads, and every other- 
combination with which they came in cont^ict. 

That these line elevators were certainly violating the anti- 
discrimination statute is evidenced by the following fact. At 
Hagar. a competitive point, wheat was quoted at 92 ceuts, corn 
52, oats 35 : at Stratton, 15 miles east of Hagar, w.here there was 
no farmers' elevator, wheat was quoted at 87, corn 45, oats 31; 
at Foster, 15 miles north, at which point there was no farmers' 
elevator, wheat was quoted at 87. corn 47, oats 32. 

The Old Line houses, finding that they were losing trade and 
money, resorted to every device and scheme possible to put the 
farmers' companies out of business. They even succeeded in 
getting the railroad companies to refuse sites for the elevators on 
their rights of way. This was in the days of i*ebates, which was 
a great hindrance to the farmers until the passage of the Hep- 
burn bill in 1906. The passage of this bill was a Godsend to the 
farmers' elevator movement. 

Boycotting the Farmers 

The greatest opposition with which the farmei^s' elevator move- 
ment had to contend. Avas when the line elevators in about 1904, 
advised the commission firms of the various terminal markets, 
that if they continued to sell grain Shipments consigned from 
Farmers' elevators, they would be boycotted by the line and 
private elevators. 

This practically closed the markets, against all grain conung 
from farmers' companies. This condition was finally relieved 
when 2 commission firms, realizing the injustice being done to 
the cooperative companies, decided to receive their shipments 
and defy the grain trust. The fight, however, continued fast 
and furious. About the year 1902 or 1903 there were some 25 
cooperative elevator companies in Illinois. Realizing that they 
were at a great disadvantage, for lack of united effort, a repre- 
sentative from each of these companies held a meeting at Spring- 
field, Illinois. Avhich resulted in the organization of the Farmers' 
Grain Dealers' Association of Illinois. They elected officers. 



H. W. DANFORTH 253 

employed a secretary, adopted a constitution and hy-laws, and 
entered til-ie fight in earnest. About a year following this, the 
same thing was done in Iowa, and the state assordation of Iowa 
was bom. Since then state associations have been organized in 
Kansas, Nebraska, North and South Dakota and Minnesota. At 
tlie present time there are in Illinois, 305 Farmers' Elevator 
(Jompanies; in Iowa, 394; Minnesota, 345; South Dakota, 435j 
Kansas, 242 and Nebraska, 271. The total membership in these 
7 states is approximately 275,000 to 300,000 farmers. 

Many farmers' elevator companies have been organized in 
Michigan, Montana, Washington, Ohio, Oklahoma, Wisconsin, 
Missouri, Indiana and Texas ; in all about 347 companies. These 
last named states, however, have not as yet organized state asso- 
ciations. 

About 3 years ago these state associations, realizing the advan- 
tage of a larger cooperation, each sent 2 delegates to a conven- 
tion which organized itself into what is now known as The Na- 
tional Council of Farmers' Cooperative Associations. This na- 
tional council is financed by contributions from the several state 
associations. 

Tumiiig Joint Stock Companies into Cooperative Societies 

Through a lack of proper cooperative organization laws it was 
necessary for practically all of the loeal elevator companies to 
organize under the regular incorporation laws of the several 
states, which makes them joint-stock companies, and not strictly 
cooperative. However, the majority of the companies through 
provisions in their by-laws and mutual agreement between the 
stockholders, are adhering as nearly to the cooperative plan as is 
possible. 

Realizing the necessity of organizing on a strictly cooperative 
J)] an, campaigns were started in the several States to secure the 
enactment of cooperative organization laws. After subduing the 
determined opposition of the politicians and other interests, prac- 
tically all of the states now have such laws. 

In Illinois there is a constitutional provision which provides that 
the owner of stock in the corporation should be entitled to one 
vote for each share of stock held. This provision has prevented 
the enactment of a strictly cooperative law in Illinois. At the 
last session of the legislature however, we succeeded in securing 
the enactment of a law which to a certain degree got around this 



254 MARKETING AND FARM CREDITS 

provision by limiting the amount of stock to be held by any one • 
man to 5 shares. 

^lost of the farmere cooperative elevator companies have a 
membership of from 75 to 300 stockholders, and they are gener- 
ally capitalized each at from $5,000 to $20,000. The shares of 
stock are usually in small amounts of from $25 to $50. While 
most of them were originally organized for the purpose of 
handling grain, many of them are now selling coal, lumber, tile 
and drilling material as a side line. 

It is of course impossible to estimate exactly the financial 
gain that has accrued to the farmer. Illinois raises on an aver- 
age 500.000.000 bushels of grain each vear and probablv sells- 
about 300.000,000 bushels. 

The statement was made some time ago by the secretary of the 
Farmers' Grain Dealers' Association of Iowa, that their coopera- 
tive companies handled about 115,500,000 bushels per year. 
Conservative men estimate that this movement has been a means 
of raising the price of grain at least 3 cents a bushel — that is, 
the farmer is receiving 3 cents a bushel more for his grain than he 
would have received if there had been no cooperative elevator 
companies in these states. 

In addition to this sa^-ing, large amounts are saved by the 
farmei-s' companies each year through the handling of sidelines, 
such as coal, lumber, etc. 

In addition to the profits before mentioned, we find better 
general conditions in many ways. There is constantly gi'omng 
a closer business relationship between the farmers and between 
the farmers and the consumers. 

A Power in Passing Needed Laws " ^ 

I am convinced that cooperation among the farmers has come 
to stay and no power on earth can stop the development of the 
farmers in all lines of industrial and commercial activities. 
Since the organization of our national council, many big ques- 
tions have been met and solved. Through the acti\'ities of our 
association needed laws have been enacted and the enactment of 
vicious laws prevented. The farmers ' cooperative elevator com- 
panies have long demanded the standardization of grades for all 
grain, and federal inspection of same. About a year ago corn 
grades were adopted and standardized by the United States 
government, and they have worked a remarkable change in the 
handling of this commodity. Any manager of a farmers' ele- 



H. W. DANFORTH 255 

vator company can easily place a sample of com in its right 
grade with the assurance that if he has done his work carefully, 
it will correspond with the grading by the inspectors at the 
terminal point. 

Improving Quality of Grades 

The new system of grading has also had the effect of fixing a 
different price for different grades so that now the farmers who 
can deliver corn that will grade No. 2, will receive from 1 cent 
to 11/^ cents more than the man who delivers No. 3, and likewise 
No. 3 grade will bring more than the No. 4, and so on down the 
line with the different grades. This has resulted in the elimina- 
tion of a great economic waste. Under the old system of grad- 
ing, practically all farmei's harvested their com early, with the 
idea of having it contain as much moisture as possible. This 
of course made it a little heavier, and by marketing it early, 
they had the erroneous idea that they were receiving com prices 
for the surplus water. This of course was not the case. In al- 
most every instance, it is necessary for the millers and other in- 
dusties making use of it, to put the corn through driers and re- 
move the excessive moisture. As you can readily see this caused 
a large economic waste. It caused a large waste in other ways. 
Much of the grain that contained excessive moisture would heat 
in transit and go out of condition. This loss undoubtedly was 
charged back to the farmer. 

While I am on this subject, I want to say that it is my judg- 
ment that this question of waste, running all through the pro- 
duction and distribution of farm products to the consumer, is a 
very large factor in contributing to the high cost of living. 
Through lack of efficient management, lack of proper care in the 
selection of seeds, insect injuries, etc, causes a large waste. This 
fact is well evidenced by the work of an organization of 475 
farmers in my home county, known as the Tazewell County Farm 
Bureau. This bureau employs a county agent at a salary of 
$4,000 per year. You are all no doubt familiar with his duties. 
Last spring he started a campaign to prevent the loss in oat yields 
resulting from smut. Many of the farm bureau members were 
instructed in treating their seed oats with what is kno"v\Ti as the 
formaldehyde treatment. When the oats were sown, small check 
plots were left. The famers kept complete records which were 
afterwards collected by the county agent. These returns made 



"256 MARKETING AND FARM CREDITS 

by the fariuei-s tJiemselves, showed that the increased fieUi of 
oats dire<^tly attributed to the eliTuiiiation of siuiit resulted in a 
saAing of $36,000 for that one year. 

This is a splendid example of what coiiperation among the 
farmers has aeeoniplished in the elimination of waste in produc- 
tion. 

An Experiment In Farm Management 

Through this fann bureau, 63 farms in Tazewell county were 

surveyed to detenuine the factoi*s that tix profits in farm manage- 
ment. Four experts fi-om the department of agriculture as- 
sisted these 63 fanners in keeping accounts covering the year's 
■opei-ation. so as accurately to get at the exact facts. A significant 
analysis of all these records for the year ending Nov. 1, 1914, 
showed that there ai'e great differences between the incomes ou 
the farms investigated. 

The average labor income on the 63 farms was minus $9-1. In 
other words, after deducting from the gross income fi-om all 
sources, the actual operating expenses and interest at 5 per cent 
on the actual investment, the average farmer lacked $94 of re- 
ceiving anything for his o^^'n labor. The average of 9 of the 
better paying farms however, showed a labor income of $1,197, 

The factore that determined these differences are many. For 
instance, as an average of the 63 fai-ms, the livestock receipts for 
eveiy $100 worth of feed averaged only $90, while the average 
for the 9 better paying farms, the livestock receipts for every $100 
worth of feed, was $144. My time is too short to go into detail, 
but suflSce it to say that this suiwey shows conclusively that imder 
the present system of farming, there is a large waste in produc- 
tion, and that if this waste is to be eliminated and farming made 
to pay, better methods must be adopted. This I believe can only 
be brought about through cooperation, and it is my firm belief 
that the farmers' elevator movement is teaching the farmer how 
to cooperate, and its advantages. 

Losses in Transportation That are Useless 

After the grain leaves tJie country elevator, we find a. very 
large waste resulting from ineflicient and careless practices of the 
railroads. A veiy large per cent of the cars used in ti*ansporting 
grain are unfit for the purpose, resulting in the loss of many bush- 
els of corn tlu'ough leaks in the ears. While it is true, many of 



H. W. DANFORTH 257 

these elairns for leakaj^e in transit are ultimately paid by the rail- 
road eornpanies, the loss must he collected from either the con- 
sumer or the producer in increased rates. 

It seems that the railroad companies in the past, or at least up 
to the time of the establishment of the inter-state commission, 
have found it much easier to advance the freight rates rather than 
increas^i their net profits through efficiency. The railroads have 
been endeavoring to establish a principle that they must have the 
fostering care of the public, even at the exj^ense of agriculture, 
as was evidenced in their last att^impt to advance the freight 
rates on grain 5 per cent. Through the efforts of the National 
Council of Farmers' Cooperative Associations covering a jjeriod 
of about 6 months, the advance was denied. This victory alone 
saved to the farmers of Illinois approximately II/2 million dollars 
a year. The attitude of members of our association is, that if 
the railroad companies need a different revenue as badly as indi- 
cated in their petition for the advance, we hope that they will 
try cwiperation, and cut out the enormous leaks which have been 
very clearly pointed out to them in a repent decision of the Inter- 
State Commerce Commission. 

Another large waste is caused by the multiplicity of middle 
men and unnecessary and uneconomic expenses incurred by them. 

I do not want to be understood as saying that the middle man 
is not a necessity, but under our present system of marketing, 
and the ruinous competition, many more men are employed than 
are necessarj^ and cause a large breach in the price received by 
the producer and the price paid by the consumer. The consumer 
is guilty of contributing to this waste. He requires that everj'- 
thing be delivered at his door in expensive packages, and because 
of competitive conditions, we often see 4 or 5 grocery wagons from 
as many different stores, crossing and recrossing the same terri- 
tory. 

The farmers' cooperative movement is undoubtedly making 
much progress towards the elimination of waste in production and 
marketing; still, before the desired goal can be reached, it is neces- 
sary that the consumer must cooperate with the producer. 

Prosecuting Educational Work 

While the farmers have accomplished much through their co- 
operative elevator organization, they still have much to do. A 
constant educational campaign is being carried on through the 
different agencies. We own and publish The American Coopera- 

17— M. F. c. 



258 MARKETING AND FARM CREDITS 

five Journal, a publication devoted to the interests of the fanners' 
cooperative elevator movement. The stock in this journal is 
owned by the farmers. In many cases the local elevator com- 
panies subscribe for the journal for each of their stockholders. 
We hope some day that every farmei*s' elevator will be organ- 
ized and operated strictly on the cooperative plan. We have a 
legislative committee that is constantly on the watch. We have 
learned from experience that when legislation is wanted by the 
big interests, nothing is left to chance. They have pickets con- 
tinuously on guard, and send their ablest and highest paid men 
to get what they want. If we would protect our interests we 
should learn that money must be raised; and the ablest men 
connected with the farmers' elevator movement, men of the 
highest character and standing must be kept in attendance upon 
the legislature and Congress. 

So far, cooperative organization among farmers, has gained 
for them a greater degree of freedom and made for progress in 
many ways. But the American farmer is slow to adjust himself 
to new conditions. Lack of experience and a lack of the real 
cooperative spirit, and a disinclination to study seriously the 
problems presented, have been big factors in retarding coopera- 
tive organization. 

When we have fully acquired the real cooperative spirit we will 
produce better crops, build better and more storage facilities on 
the farm instead of trusting this to the speculators and gamblers 
in the large primaiy markets, adopt better methods of harvesting 
our crops, build better roads, supply ourselves with a better 
credit and marketing system. 



G. W. LAWRENCE 259 



GRAIN, STORAGE, FARM-COUNTRY ELEVA- 
TOR. TERMINAL WAREHOUSE 

G. W. Lawrence 
Secretary, Farmers' Grain Dealers' Association of Kansas 

From the producers standpoint we ought to store the grain 
where it will tend to "Bull the Market." From the consumers 
standpoint we ought to store where it will tend to "Bear the 
Market". From the speculators standpoint the grain oug'ht to 
be stored where they can get the most complete knowledge of the 
supply, and enable them to best manipulate the market. From 
the millers' standpoint it ought to be stored where they can 
cheaply and easily secure their supply. So it will not be strange 
in discussing this question, if our ideas may differ. But to ar- 
rive at a conclusion that is miost beneficial to all concerned, I 
know of no better way than a comparison of ideas or a discussion 
of the question. First, I desire to express a negative proposi- 
tion and that is our local cooperative elevator companies are not 
the proper ones to store grain. "We are not organized for that 
purpose. "We have not that in mind when we employ managers, 
and very few of our managers are properly versed in the han- 
dling of options, nor have they time to devote to that line of 
thought nor the facilities to successfully conduct this line of bus- 
iness ; neither are our companies organized with sufficient capital. 
If the producers desire to handle the storage business on the 
cooperative plan, let them form organizations for that purpose. 

At the present time I believe that the most satisfactory place 
to store the larger part of the surplus grain is on the fm^m, and 
by the farmers. By so doing the farmer can market the grain 
at less expense, doing at least a part of it at the time of the year 
that work is not so pressing, and in many eases doing it with his 
own equipment and thereby not feeling the expense. There are 
exceptions to the above where a farmer is located so near market 
that he can dump his wheat in the elevator or when he is thresh- 
ing it at a time when he thinks the demand and the price is above 
the average for the year, or when the need for money is so great 
that it is a necessity to sacrifice time or grain to raise it. (A 
condition that we hope to see remedied by our rural credit sys^ 



260 MARKETING AND FARM CREDITS 

toni.) Rut our idea is that if Ave can hold tho surplus of grain 
on tho farm until nooiiod, we will equalize the supply to the de- 
mand, thus establishing a more uniform and staple priee for the 
erop. Frequently we will save a back ihaul in freight, save our 
elevators from the straiij that we so often put upon them to care 
for our grain while we are forcing it on the market, relieve the 
situation freipiently when we have a scarcity of cars, save at 
least one commission and the added expense of storage at term- 
inal points. 

I do not wish to convey the idea that I am opposed to terminal 
elevators, because I am not, and as every one must admit, they 
are a necessity to the satisfactory Ihaiidling of the food products 
of our land, but I do think we have been forcing our grain on the 
terminal elevators too nuicli to get the best results to either the 
producer, the shipper of the consumer. 



RAILROAD PROBLEMS VIEWED BY THE 
PRODUCERS 

W. J. Ray 

Secretary. Farmers' Grain Dealers' Association of Iowa 

I will ask you to picture the present development of the 
United States in its relation to agricultural production and dis- 
tribution, to the manufacturing and mining industries, to the 
livestock industry and to the nuiny other resources possessed by 
our country which give employment and homes to millions. 
What if there had been no great networks of railways threading 
the country to form the arteries of distribution ? Would devel- 
opment have been possible- Undoubtedly the answer is, ' ' No. ' ' 
Therefore some people are inclined to feel that the railroads are 
the great benefactors of the people. Of course the railroads 
have given service ; but in every case the public has paid and 
paid a full price. So the matter reduces itself to a question 
.of fairness of rate for service rendered. 

The general public wants to know: Have freight rates and 
passenger fares of the past been adequate and sufficient for the 
railroads to meet maintenance expenses, to pay interest on all 
l>onds and other indebtedness, to aiford a reasonable rate to 
the investor, and to provide for development? The railroads 



W. J. RAY 261 

have said that their revenues were not sufficient and in the past 
few years have asked for numerous increases in freight rates. 
The most important of these have been the eastern 5 per cent 
scale and the western general increase. Some 41 roads partici- 
pated in the request for increased freight rates in the western 
territory. Nearly as many joined in the eastern 5 per cent 
request. The territory covered by the proposed freight rate 
increase included the principal shipping sections of the United 
States and embraced the major part of the nation's shipping 
tonnage. 

Practically all shippers and state railroad commissions pro- 
posed the freight rate increases. They asked the Interstate 
Commerce Commission for suspensions and investigations. The 
suspensions were granted, the investigations were made and 
hearings were held by the Interstate Commerce Commission. 
The result was that freight rate increases were allowed as X)er 
request on about 50 per cent of the tonnage under the eastern 
5 per cent case, after a second hearing. The disastrous effects 
of the European why- apparently had its influence upon this case. 
The greater portion of the proposed freight rate increases 
for the western territory were denied by the commission. The 
classes of tonnage of a special interest to the agricultural popu- 
lation involved in this case, embraced grain products and live- 
stock products. I shall now confine my arguments i)rincipally 
to grain production and shipments as I am more closely in touch 
with this product. 

Now, I believe that every type of occupation should derive a 
sufficient revenue from its operations to compensate it for the 
service it rendered the public. Upon that proposition I will call 
your attention to the following facts: 

The Interstate Commerce Commission in drafting their de- 
cision in the western case makes the following statement: 

"These railroads cannot exist unless rates are established 
which will yield a fair return upon their property. We 
must, therefore, in fixing these rates, have regard not alto- 
gether to any particular railroad but to the whole situation, 
and must consider the effect of whatever order we may make 
upon all these defendants." 

This statement is very clear in my mind of a fixed method of 
equity and legal adjustment of a disputed request. The rail- 
roads, in their plea for higher rates, cite us to the weaklings 
among their number and show that they are unable to meet their 



262 MARKETING AND FARM CREDITS 

interest demands, to pay dividends, and that some are virtually 
insolvent, some are on the verge of being in bankruptcy; some 
are in the hands of reeeivei*s,, while the majority are a great 
financial success. 

Why Railroads Become Bankrupt 

The weakened condition financially of the bankrupt or i*e- 
ceivership roads conies from a variety of causes and has been 
proven from investigations seldom if ever to come from insuffi- 
cient revenue charges or lack of tonnage tendered them for ship- 
ment or passenger traffic. If you have followed investigations 
of the New York and New Haven Ky. by the government, also 
of the great Rock Island system. I believe you have Siitisfied 
yourselves that the financial depressions and downfalls of such 
roads come very largely from mismanagement, high finance 
manipulation by officers in authority at some period of time in 
the floating of bonds or other methods of watering stock. Hon. 
J. D. Hashagan, makes this statement that 25 per cent of the 
mileage in the western classification territory is in receivers' 
hands. Some of it due to financial juggling and trickery ; some 
to do^^^l right mismanagement, and some to other causes. If 
this be true, it is a deplorable situation. But must the shippers 
of this country and the public, be called upon to pay a high 
rate of revenue in order to place these poorly managed roads 
under the present condition, upon a soimd basis and, thereby, 
grant premium securities to the prosperous roads? Railroads 
are not in a singular class of depleted business and failure. We 
find them in all lines of business and industry, among manufac- 
ture, mining interests, fruit growers, farmers and agricultirr- 
ists, bankers, merchants, shippei^s and many other- vocations. 
It is said, from undisputed facts that there are at present 82 rail- 
road companiess. with a mileage of 41,988 and a capitalization 
of $2,264,000,000 in the hands^ of receivei-s ; in 1S94. June 30, 
there were 192 roads in the hands of i*eceivers that had a mile- 
age of 40.818. and a capitalization of a little more than 2 billion 
dollars. Considering the mileage and capitalization of all the 
railroads iu 1894, and comparing that mileage and capitaliza- 
tion with the mileage and capitalization now. 1894 was a worse 
time than now. The railroads, in petitioning for increased 
rates and fares, merely took advantage of an opportune time to 
force their point in making their application based upon a 
lean year in railroad traffic and transportation of tonnage and 



W. J. RAY 263 

passenger traffic and of war conditions. Yet the evidence and 
data produced by shippers and protestants, experts and ex- 
jjert accountants from records of railroads, seemed to jjrove 
clearly to the commission that the major portion of the increased 
rates as proposed were not warranted. 

The commission states in the report of the western case that 
the carriers base their claims to additional revenue upon the 
grounds of their financial needs and the downward tendency of 
their net earnings in this western region and contend that com- 
modities singled out by them to bear the proposed increases are 
not now carrying their equitable part of the cost of transpor- 
tation. 

Fanners Contest Railroad Statements of Earnings 

Both of the contentions are traversed by the protestants, com- 
prising the state commissions of a number of states primarily 
affected and individual hsippers. Generally speaking, the pro- 
testants contend that the financial condition of the carriers does 
not warrant the x^i^oposcd increase in revenue; that the last fis- 
cal year was abnormal both in regard to transportation and to 
other branches of industry; and that in recent years the car- 
riers in large measure have built up their properties to a higher 
standard out of operating revenues, and have thereby produced 
a showing which in so far as it is unfavorable is in great meas- 
ure illusory. In general, it cannot be said that the protest- 
ants have alleged that conservation of the carriers' revenues 
can be effected by the practice of more rigid and appropriate 
economies, but rather that the carriers have realized and are 
realizing the benefit of adequate revenue; that their real net 
revenues have been masked by new methods of accounting ; that 
charging against income what is asserted to be a proper charge 
to capital and the practice in the past of conferring valuable 
concessions upon shareholders of railroads have resulted in an 
understatement of the real earnings of the carriers. Statistics 
and exhibits were presented in the western rate case hearing 
of some lines of industry to prove that the net revenue on invest- 
ment, service, etc., of the railroads were greater than on some 
other lines of business upon which increased rates were asked. 
For instance, testimony was given from government records that 
farmers' net revenue was less than 4 xjer cent. Other expert 
testimony showed like results and even a lower net revenue to 
the farmer or producer of grain and livestock, upon which the 



264 MARKETING AND FARM CREDITS 

heaviest portion of freight rate increase was proposed and of 
wihich the commission denied an increase. It was further 
proved that the farmer pays the freight. In other words, all 
freight charges being deducted by the shipper from the pur- 
chase price of his grain and livestock, any increase in rates would 
depreciate the value of his products on a relative basis. Like- 
Avise if an increase on grain were permitted, it would have a like 
influence on the value of grain. 

Railroads Net More Than Fanners 

We people of the grain belt under western trunk line terri- 
tory, with data, figured on a relative basis as to railroads and 
producers of the great bulk of the food products of the coun- 
try. We found that the net revenue of the roads is nearly twice 
as great as that of the producers. We feel justified, therefore, 
in protesting the proposed freight rate increase. 

The freight on an 89 M car, loaded with coarse grain to maxi- 
mum capacity, shipped from central Iowa to Chicago, under the 
present rate, equals in freight charges $105.60. Seventy such 
cars in one train, Ayhich is not above an average train of loaded 
cars, equals $7,392.00, gross revenue. 

In the report of the Interstate Commerce Commission in the 
eastern case we find the following statment : 

"The records show that there are many unremunerative 
rates and unremunerative practices now in effect throughout 
the official classification territory; that a very substantial 
amount of service is performed without any charge what- 
ever, and that undue burdens are cast upon the carriers 
through various influences. We have had in this proceeding 
an opportunity to learn also to what extent and with what 
effect on their revenues abuses exist among the railroads be- 
cause of the treatment of one by the other in competing for 
traffic. The abandonment of unremunerative and waste- 
ful practices involves among other things the elimination of 
the free services and excessively low rates which represent 
in very many instances, the price a carrier pays for the 
large tonnage of influential shippers and result in making the 
carrier bear the geographic disadvantages of individual ship- 
pers and expenses properly a part of their manufacturing 
cost. The elimination of the preferences created by these 
means would give to the carriers very largely increased earn- 
ings and at the same time properly distribute the necessary 



W. J. RAY 265 

burdens of transportation, so that those who get the service 
shall pay for it. 

* ' But following the suggestions made in the original report, 
the carriers could undoubtedly secure more additional net in- 
come than the amount estimated to accrue under the proposed 
horizontal rate increase, and far more than can accrue to 
them under the relief now accorded in the supplemental 
report. ' ' 

In following closely tihe investigations made by the Interstate 
Commrce Commission, and the govememnt, of the freight rates 
and the many phases of control, management and manipulation 
of the financial affairs of railroads, by such railroad companies, 
I am fully satisfied that railroads in dire need of assistance are 
usually responsible for their depression in some manner due to 
their negligence, rather than to lack of adequate revenue. 

If the farmer meets financial loss or suffers a lean year, which 
a great many in the corn belt will experience this year, he must 
suffer the loss, he has no recourse upon others. Thus it is with 
the manufacturer, the merchant, exporter, shipper and various 
other lines of business. No doubt some systems of railroads will 
of necessity be thrown into receivership, be re-organized, and, 
thereafter managed on a thoroughly conservative and legitimate 
basis, become a prosperous railroad system to the credit of its 
stock holders. Even though some of them have suffered a loss 
by mistakes of others. 

What One Railroad Earned 

Allow me to cite you to a late annual report of the Baltimore 
and Ohio railway which I believe to be a normal and average 
railroad system. The report shows that the equipment of the 
company on June 30tlh, 1915, consisted of 2,399 locomotives; 
1,261 passenger cars ; 86,097 freight cars ; 3,163 work cars ; and 
144 pieces of floating equipment. The total railway operating 
revenues were $91,815,797.34, a decrease of $7,348,212.63, or 
7.41 per cent. 

The total railway operating expenses, were $63,925,507.74, a 
decrease of $10,477,880.78 or 14.08 per cent. 

The ratio of operating expenses to total revenues was 69.62 
per cent, compared with 75.03 per cent, for the previous year. 

The net revenue from railway operations was $27,890,289,60, 
an increase of $3,129,668.15, or 12.64 per cent. The gross in- 



2t36 MARKETING AND FARM CREDITS 

ooiue from the year's operation was suffieient to enable the eoin- 
pany to meet its tlxed and other charges, to pay the established 
4 per cent dividend ou the pi'eferred stock and 5 per cent on the 
common stock and leave a surplus of $771,473.86. 

That is certainly an excellent showing, and would indicate 
that a moi'e careful and conservative method of management had 
been maintained than previous yeai*s, adding very materially to 
the net revenue, results. 

General reports of numerous railroads the past few months, as 
submitted show about such results as the above statement. Let 
us hope that fi-eight rates may soon become a settled situation, 
without an undue tax being placed upon tlie shipping public, 
and yet that such rates may be sufficient and remunerative to 
the railroad systems of this country. The present development 
and commercialism of this great country could not exist with- 
out railroads. 

The question of control, etc.. enters into the subject. Rail- 
roads were left alone so long without the public interfering in 
any manner with their operations and regulations, that they 
seemed to think the people of the country had no more right to 
ask for their legitinuite rights and protection against the manip- 
ulation of railroad operations than the public would have to a 
man's private property. Yet they were corporations serving 
the general public and dependent upon the public for their 
existence. 

'We find, however, after many yeai*s of quietude in railroad 
operations and pi*ogi*ess, covering a period of time when many 
gifts, as contributions fronr municipal town, county, state and 
federal governments, in money and lands and bonds, etc., were 
bestowed upon railroads as an incentive for further development 
of railroad systems through the country, it became apparent 
that, through their management and operations, undue advan- 
tages were being practiced in some measure against the public. 

Investigations and regulations of railroad traffic and opera- 
tions were begun by states and state commissions. Practices of 
discrimination and rebating were found to pivvail between dif- 
ferent kinds of traffic, sometimes between different communi- 
ties and individuals at the same place of business. Agitation 
grew to a point of serious need, resulting in the passage by Con- 
gress in 1SS7 of the act to regulate conunerce. which carried its 
fii-st amendment in 1SS9, then again in 1902, known as the Elk- 
ins Act, then the Hepburn Act of 1906, which gi-eatly strength- 



W. J. RAY 267 

ened the commission's authority and increased its membership. 
Some minor changes took place in 1910. 

What Is Its Remedy? 

A member of the Commission makes this statement — that, 
''every step has been taken as based upon experience, gathered 
by investigation, upon dis(;losures, and, we may say, attempts to 
to regulate with, safety jand justice." 

I personally do not advocate government ownership of rail- 
roads. I doubt very much the practicability and feasibility of 
such a proposition. There no doubt would arise insurmountable 
difficulties when we get into politics with the management of 
railroads and the government placing millions of men as em- 
ployes, operating the 250,000 miles of railroads in this country. 
It appeals to me that regulation of tariffs, freight and passenger 
rates and overcapitalization by the Interstate Commerce Com- 
mission, or some such body as Congress delegates for that pur- 
pose, to be a much more practical method. 

I believe that the physical valuation of railroads should be 
established, and that procedure is now in progress interstate. 

I could only add in my opinion — railroads will always need 
government regulation of their operation, practices and tariff 
charges upon the public. It is human error to place an undue 
or over-tax against the other fellow for personal gain. 

It further appeals to me very forcibly that the public must 
use care and precaution to prevent a law being passed of fed- 
eral judiciary action, whereby claims and grievances with rail- 
roads by the shippers can and will be carried by such corpora- 
tions to Washington, D. C, which would entail more expense 
to the shipper than the payment of such claims or damages would 
amount to to the shipper or complainant. 



268 MAUKKTINH^ ANP F.VU^l OUKPITS 



BANKS^THE CREDIT AND CAPITAL OF 
COOPER ATI\*ES 

U. J. K.VKMF.K 

Secretary. The Farmers' Grain Dealers* Association of Minnesota 

Wlioii wo started our littlo olovator .fit Airlio wo woiv not 
partioularly wbbod. Wo gt>t tiio sacks baok. Tho conditions 
\voi\^ snob tbat wo bavo dooidod to jn^ into tbo olovator business 
tor oursohosi. I was oUvtod tbo st^'ivtary. 

At tbo lirst mooting tbore woro bait' a do/ou mon ropr\^sontiug 
oonmiissiou bousos in Minneapolis present : and tboy all otYotvd 
to tinanoo us for t> per oont and lend us all tbo money wo wanted 
if wo would sell every bnsbel we bad to tbont. We did not take 
tboui up; instead we put our funds in a local bank on a system 
of dail>- Ivilaiut^ Wo made very satisfactory amininMuonts 
witb tbo bank and tbo autboritios bavo allowed us to draw on 
tbom almigbty bai\l at tiuu^ 

Out in Airlio we do not take our bats otT tbo way wo used to 
do in \ow York State wbon wo wont into tbo bank. Wo call 
tbo Invukor^ by name. So one day wbilo I was in our bank. 
Ed David. t5l\e prrNsideut, said : ' ' Tbo biiiik examiner was do^^^l 
beiv tbo otber day and bo Siud tlu>so o notes from your Airlio Ele- 
vator tbat tbo dilvctors bavo jrivon — Arot\'t tboy tbo same Air- 
lie Elevator notes t" "dust tbo siime. " 1 answvivd. lie sjud: 
*'You bavo gv>t - or o of tbom." In tbo meantime before we bad 
those $lo.000 of dirwtor notes tbe cvMupany bad borrowoil rigbt 
up to all tbat tbeir cbart*^r bad allowed tbom. It is a pivtty 
tigbt tix. but I Si\id: 

*'Ed, kx>k here: you know almigbty well if you over bad any 
irilt edsr^^ security in your bank tlu^so notes an^ it. Tbotv are 
i> men on tbeir security and onl\- 1 of tbom is not responsible and 
you do not need to tell me who ilie is."' That was so. yet there 
was that little bank oxanunor kickinsr on o little artlt edgv^ notes 
tbat tuiy one man acting as a sivurity could bavo paid in a pinch. 
But if the chairman ^^•as as well tixotl as ho is. and if he bad 
been do%m there and o^*e^vi^uvn his aciH>unt #400.00 no matter 
how arilt ed^^ he misrht K^, that president would have kickixi 
like ovorytbiuiT and would bavo wanted somotbing tixod riirbt 
aw;>v. Rut if be bad bad a t\oto of $rvOW witb P n\on on it he 



JAMES. 10. BOYI.E 269 

would liiivc pjisscd oil Mint note bccauHci technically it wiis just 
as f»'oo(l Ji.s ^'•old ; but, nn oyv.v{\rn\'i \\\i\ could not f);iss. Now that 
is ji technicality iu hankirifr tJi;i(, I do not like. Any of you who 
hav(^ had anytliin^- io do with tlic banking business know that 
it is put over lots of times a^ud that tfu^ bank (ixarniucj- |)asses 
pa{)er tliat is not worth tlie i)a|)er tfu^ uotcis af(! wi-ittcni on. 

I believe in tju^ bank, I believe that the bank is the friend 
of the farituu'. Out our way the. bank eertairdy lias b(K!n, but 
there an; many tilings that have got to be adjusted before tlie 
bank becomes the working instrument Ihiit it could become for 
the dev(>hipm(>nt of the community. 



SOME DIFFICULTIES OF A STATE TERM- 
INAL ELEVATOR SYSTEM 

Jamks Fj. Hoylk 

Professor of Economics and Political Science, University of North 
Dakota, Grand Forks 

This is a pcH-uliarly diClicult (|uestion to discuss, owing to the 
place it occupies in tlie minds of oui- lai'tiiers. The farmers want 
state terminal elevators, and will very likely get them, not be- 
eausc the nuitter has been studied by them carefully and tiie 
evidence sifted. Their doctrine of state ownership in this field 
has become a "state of mind" with them, rather than a doctrine. 
Indeed, in some sections it has become a religion. Thus the Ca- 
nadian farmei-s in their famous siege of Ottawa in 1910, when 
presenting tiieir case to Premier Lauri(M', si)oke of the "mystery" 
and "secrecy" of the existing ternunal activities, of the "dis- 
trust" and "suspicion" which attacihed to these activities, and 
of restoring a. "feeling of trust and confidence in the minds of 
the western farmers" by means of governuu^nt elevators. Mr. 
F. W. Green, secretary of the Saskatchewan Grain Growers' 
Association, expressed the farmei's' sentiments at this Ottawa 
gathei-ing in these words: 

"We have the interior elevator system with all the un- 
eei'tainty oi' weight and grade, and the various tricks resorted 
to regarding car distribution, special binning and shipping; 
then we have th(^ grain exchanges with the gambling, price- 
fixing, problem-hedging, future selling, puts and calls, shorts 



270 MARKETING AND FARM CREDITS 

and longs, ■with the bulls and bears. Then the difference of 
price betAveen Minneapolis an.d "Winnipeg, ranging from 10 
to 15 cents a bushel for an inferior sample of wheat. This 
with their system of grading and sampling all forming part 
of a complex system more or less mysterious to our farmers, 
causing a serious state of suspicion and unrest which is an 
evil in itself, but none of these are responsible for more dis- 
trust and want of confidence than the inspection system in 
connection with our terminal elevaturs. All these being in- 
separable, each aifected by the other, and, as we think, vit- 
ally affecting the quality and price of every bushel of grain 
in the West. Our views, right or wrong, are the cause of 
our agitation and action." 

This same religious fervor for state terminal elevators finds 
expression among the members of the American Society of 
Equity of the Northwest and among other similar organizations 
in various sections. This condition exists in spite of the fact 
that 95 per cent of the grain reaching the terminals has already 
passed out of the ownership of the farmer, and hence the ter- 
minal elevators can only have an indirect effect upon him. This 
question of state-owned terminal elevators, indeed, seems to be 
but a part of the growing sentiment in favor of government- 
OAvned packing houses, canning factories, government banks, and 
government railroads. To the farmer no longer is it the simple 
business proposition of "What is it going to cost?" and "What 
is it going to accomplish?" Yet this plain business question 
seems to me to be the real issue. 

Relation of Question to the Grain Trade 

Wlien seeking a remedy for any supposed evil in our grain 
trade we must bear in mind the fact that our grain trade is on 
the whole on a fiercely competitive basis, conducted on narrow 
margins, and subject to world market conditions of supply and 
demand. To the disinterested observer, tracing the wheat and 
flour prices from farmer to consumer, there are apparent 7 in- 
teresting points of contact as follows: (1) local market; (2) 
terminal market; (3) foreign market; (4) the miller; (5) 
jobbers, wholesalers, and retailers; (6) bakers; and (7) trans- 
portation. Transportation is now conducted inider rates super- 
vised or fixed by public authority. The actiA^ties of millers, 
merchants, and bakers are substantially free from public con- 



JAMES. K. BOYLE . 271 

trol. The foreign market is beyond our control. That leaves 
the local elevator and the terminal market. And of these two, 
the local elevator thus far has escaped with a minimum of 
regulation, but exactly here, according to the findings of the 
federal government, occur the biggest leaks between the farmer 
and the miller. The report of the secretary of agriculture, of 
October 24, 1914, on the prices of wheat, etc., (63 Cong. 3d Ses- - 
sion, House Doc. 1271) traces a bushel of wheat from the Kan- 
sas farmer to the Livei'pool market. After stating "that the 
farmers of Kansas, as a general rule, are obtaining all their 
wheat is worth," the report contains this observation: "The 
weakest link in the chain of marketing Kansas wheat is the 
country elevator. Compared with the value and difficulty of 
service rendered, the margin taken by the country elevator is 
perhaps larger than that taken by any other middleman in the 
marketing of wheat." The same report speaks of the termi- 
nal market in these words: "In conspicuous contrast with the 
country elevator situation is the great efficiency and highly 
organized method of operation of the terminal grain operators 
and exporters. In the case of the export trade especially the 
profits per bushel are extremely low considering the service 
rendered and the capital and risk involved." 

Tendency to Regulate Terminal System 

These terminal activities, it is hardly necessary to add, have 
been subjected, since the days of the famous case of Munn 
versus Illinois, to a constantly increasing degree of govern- 
mental regulation. Not only the methods but also the charges 
for the various services are as a general rule regulated by law 
or administrative order. And now comes the demand from the 
farmers and to some extent from the millers that we have 
government ownership and operation of the terminal elevator. 

Alleged Evils of Present System of Terminals. 

At each important terminal today we find one or more grain 
warehouses open to the public for storage of grain and known 
as a "regular" terminal elevator or public warehouse. Some of 
the alleged evils of our present system are attributed solely to 
this system of private-owned public warehouses. Other evils are 
related only in part to the terminal elevator, and in part to the 
inspection system. The gathering chorus of complaint may be 
said to be directed to the whole united system of terminal activi- 



272 MARKETING AND FARM CREDITS 

ties, and the terminal elevator cannot be entirely dissociated from 
the rest. Here is a complete catalog of the alleged evils which I 
find in the various official and unofficial investigations of the ter- 
minal problem : inspection, dockage, screenings, shortage of good 
grades, overage of bad gi'ades, grade manipulation, shipping out 
more grain or better grain than received, lending out stored 
wheat, mixing, grain hospitals, too much spread, improper 
weighing, cleaning not sufficiently supervised, bleaching, storage 
and insurance rates too high, suction draft applied, competition 
wanting, monopoly, low prices, accumulation, of grain at ter- 
minals, warehousemen in dual capacity of custodians and mer- 
chants, commissions too high, scouring and bleaching, degrading 
our grain exports. And we must study state terminal elevators 
as related to these alleged terminal evils. 

To analyze these charges one by one would take too much time. 
The most serious of them may be considered at this point, and 
their relation to the proposed remed}^ of state ownership of the 
terminal elevator. 

Storage is a live issue because the crop is hurried to market as 
soon as harvested. The wheat crop alone averages over 
700,000,000 bushels, and most of this crop is rushed off to the ter- 
minals within 90 days. There is not adequate storage on the 
farms, or at the local elevators, hence the great accumulation at 
the terminal in the crop moving season. Statistics from various 
markets are very striking on this point. It is needless to blame 
the terminals for this accumulation. 

Mixing of different grades of wheat is done by private elevators, 
but is forbidden by law in the public warehouses. Yet the con- 
troversy over mixing is one of the most serious issues now stirring 
the farmers. We have much conflicting testimony on this subject. 
A report of our federal government (Bulletin of the U. S. Depart- 
ment of Labor, Whole Number 130) contains these statements: 
"As the ordinary (country) elevator has only 6 or 8 storage 
bins, there is necessarily a mixing of grain as it comes from the 
farmers, wheat of like grade being stored together^; An ele- 
ment of profit to the elevator is the mixing of grain in such a 
way as to raise the grade of part of the wheat put into the mix- 
ture. For example, a quantity of wheat may be bought as No. 
3 at a No. 3 price and mixed with fine No. 2 wheat in such a 
proportion that the mixture will retain a grade sufficiently 
high to be sold as No. 2. The grade of wheat may be raised 
by fanning out weed seeds and at the same time cleaning ouf 



JAMBS. B. BOYLE 273 

chaff, thus raising the test weight. This mixing of wheat 
bought at different prices and the raising of the grade begins 
at the country elevator and is practiced to a greater or less ex- 
tent by every one handling the grain. * * * The millers 
complain of some of the practices of storage warehouses ; first, 
that of mixing wheat to raise the grade, which, however, is a 
charge that seems to apply about equally to all persons han- 
dling wheat ; second, and more important, is the complaint con- 
cerning the scouring of wheat. By scouring wheat the evi- 
dence of some of its imperfections, such as sprouts, mold, and 
smut are removed or disguised and unsound wheat is made 
to appear better than it really is. The miller prefers to 
have the grain come to him in its natural state, so that he can 
more readily see the character of the wheat that he is buy- 
ing." 

The state grain commissioners reported to Governor Burke 
of North Dakota in 1910 concerning mixing at Duluth as fol- 
lows: "The mixing of different grades as they are inspected 
in and the grades they finally take out, on our inspection, is 
unjust and works to the disadvantage of our state. ' ' 

Report of Canadian Commission 

In the 1906 Report of Canada's royal commission on the grain 
trade in Canada the subject of mixing is dealt with in theso 
words: 

''We have had complaints of loss by the farmers owing to 
the alleged substitution of and mixing of grains with that 
which was special binned. To prevent this practice, we are 
suggesting an amendment providing for the keeping of 
samples of all such special binned grain. * * * y^Q also 
found from examination of arrivals of grain in Great Britain 
that the grain as received there contains too great a percent- 
age of foreign matter. It is quite evident to us that there 
should be a complete supervision of the cleaning operation of 
these elevators (at Fort William). We were convinced at 
the time of our inspection that many of the cleaning ma- 
chines installed in the different elevators have not the capac- 
ity nor are they of the proper type for cleaning the grain 
to grade. With regard to the quality of the grain itself we 
would say that while there is a possibility of elevator oper- 
ators mixing grain contrary to the Inspection and Sale Act, 

18— -M. F. c. 



274 MARKETING AND FARM CREDITS 

vre did not find in the grain to its ultimate destination in On- 
tario and Great Britain, that there "was anr serious com- 
plaint as to the quality of the different grades being materi- 
allv reduced; still in some cases samples "were produced to 
us that "would lead us to believe that there had been either 
manipulation or serious mistakes made some"where." 

Our industrial commission report claimed that the farmers 
ship grain in poor condition, so that cleaning and mixing are 
necessaiy before binning is possible. 

The Equity Cooperative Exchange in St. Paul reported to the 
North Dakota Board of Control (December 14, 191-i) as follows: 
'"In the first place, no public grain elevator should be in 
charge of a custodian "who deals in grain. He should simply 
be custodian. A public elevator should have "what is kno"wn 
as a cleaning house attached to proper bras so that grain 
may be properly cleaned, etc., and put into storage by the 
o"wner. The cost of operation should be the lo"west possible 
and -without profit — just enough to pay expenses. Every 
facility should be offered farmers to clean, clip, dry, sort, 
mix, or other-wise prepare their grain for market, the ser"vice 
performed being by one having no interest "whatever in any- 
thing but the performing of the service and the custodian- 
ship of the property. ' ' 

Conditions in Minnesota 

One of the most thorough investigations into the mixing 
problem was conducted by the "Works Grain Investigation Com- 
mittee of the ^Minnesota state senate in 1913. On the subject of 
cleaning, drying, and mixing gi-ain in terminal elevators, they 
report as follows : 

"Your committee investigated the cleaning, drj-ing, and 
niixing of grain as carried out in the terminal elevators. 
Tables submitted show that the terminal elevators shipped 
out in 2 years more No. 1 and- No. 2 wheat than they re- 
ceived. This result is brought about by improving and mix- 
ing the wheat. During some seasons a considerable quan- 
tity of wheat is received at the terminals containing a sur- 
plus amount of moisture. Such wheat is graded ' No Grade ' 
by the state inspection. After it is dried sufficiently it may 
be entitled to a higher grade. Again by mixing some No. 2 
wheat with a sufficient amount of choice or premium No. 1 



JAMBS. E. BOYLE' 275 

the whole quantity will grade a medium or thin No. 1. A 
similar increase in quantity of any grade may be brought 
about by reducing the quality within the grade through ad- 
ditions of lower grade wheat. The possibility of mixing a 
certain amount of lower grades of wheat with higher grades 
increases the demand for and advances the price of the lower 
grades. 'No Grade' wheat frequently sells within 3 or 4 
cents of No. 1, and the average price of the purchases of 'No 
Grade' by one terminal elevator company during the present 
season was 5% cents below No. 1. The same company pur- 
chased its No. 4 wheat at an average of 5i^ cents below No. 1. 
The possibility of improving and using these grains with 
higher grades undoubtedly was a factor in making these 
prices. That is, the value which wheat has for mixing pur- 
poses is paid for it by terminal elevator companies as well as 
miUers. Section 2053, Revised Laws 1905, as amended by 
Chapter 82, General Laws of 1909, requires any warehouse- 
man operating a terminal elevator to store grain in separate 
bins on the request of any owner or consignee, and requires 
the warehouseman, at the request of the owner or consignee, 
to clean, dry, mix, or otherwise improve the condition of or 
value of such grain and to deliver the same separately froTu 
the grain of any other owner or consignee, upon order. 
Therefore, any owner or consignee of grain, unless he is of- 
fered full f alue for that grain in its condition on track, may 
use the same facilities the elevators and mills have to clean, 
dry, mix and improve the condition of the grain. The fact 
that owners of grain seldom avail themselves of this privi- 
lege would seem to indicate clearly that buyers of grain at 
terminals pay the full value of that grain with reference to 
the possibility of improving it by drying, cleaning, and mix- 
ing. ' ' 

A committee of the l.Tinnesota house at the same time reported 
that the state should provide facilities for mixing grain until 
the farmers could cooperate and do it themselves. 

Mr. Henry Feig, supervising inspector of country elevators 
for the State of Minnesota, in a letter published in 1911, spoke 
of the effect mixing has on the price paid to farmers, in these 
words: "The mixing of grain in this manner is a benefit not 
only to those who mix the same, but it reflects itself back to 
the producer of low grade or No Grade grain. The process of 



276 MARKETING AND FARM CREDITS 

mixing and cleaning makes it possible to raise the value of low 
grade or No Grade grain." 

The Canadian Eoyal Comjnission in 1906 reported that the 
price is not based on the poorest wheat in the grade. To 
quote : ' ' The argument is that the price of each grade is based 
on the lowest quality of that grade. This argument is not 
based on fact. The price of any grade is based on the result- 
ing average sample of all cars of each grade as they pass 
through the inspector's hands, and where the car of the high- 
est quality loses, the car of the poorest quality gains." 

Further evidence on this point is unnecessary. The law now 
provides for special binning whereby the farmer can get all 
the benefit of mixing. Yet the farmer does not use this priv- 
ilege. Is there any reason to suppose, therefore, that he would 
make extensive use of the mixing practice, even if he had a 
farmers" cooperative terminal or a government terminal? The 
farmer now has an adequate remedy in his hands for this al- 
leged evil. 

Inspection, Weig"hing, and Dockage 

Inspection as now carried on is done by the state, the inten- 
tion being to do impartial justice to the shipper and to the 
buyer and at the same time maintain the honor and prestige 
of the state's grain market or markets. Thus Minnesota in 
competition with Chicago, and Chicago in competition with the 
2 ]\'Iissouri markets each seeks to maintain a market which 
will hold the shippers' patronage. Various official investiga- 
tions uniformly report the inspection to be inexpensive and fair 
to all. The most serious criticism of inspection is that it is 
now a matter of judgment only. 

To quote the federal government report on this (Bulletin 
Bureau of Labor Statistics 130) : 

"The states make provision for the grading and inspec- 
tion of grain for the convenience both, of the buyer and the 
seller. The fee for inspection provided by the law of Kan- 
sas is 1 cent per 1,000 pounds, minimum capacity of car, 
which fee in practice is paid by the shipper of the wheat. 
A fee of like amount and paid in like manner is charged 
for weighing. As already explained, wheat i« graded ac- 
cording to its weight, its soundness, its freedom from for- 
eign matter, and, recently, also by its color. The only cer- 
tain element entering into this grading is the test weight. 



JAMBS. E. BOYLE 277 

The other elements are determined according to the judg- 
ment of the inspector. As a consequence there is much con- 
flict of judgment as to the grading of wheat. Inspectors 
disagree with each other and sometimes an inspector re- 
verses his previous grading, and there are frequent appeals 
from the decision of the inspector to that of the chief in- 
spector. So unsatisfactory is the present grading that there 
is a conflict between the Several states and one state will 
not accept the grading made by another state. It has been 
suggested that the disputes about grading, especially for 
shipments from one state to another, could be avoided by 
providing for inspection by federal authority. Such inspec- 
tion has been urged by many millers and grain shippers, 
who also urge that after inspection there should be no mix- 
ing of wheat of different grades. However honestly and 
carefully performed the inspection may be, still it is not a 
scientific test of the milling quality of the wheat. As be- 
fore stated, the gluten content is the element next to sound- 
ness considered in determining the price of wheat. Test 
weight, shape of berry, and color tend to indicate the 
amount of gluten in the wheat berry, but do not by any 
means determine it. Because of the crude tests applied 
in the present method of inspection a scientific laboratory 
test is coming into popular favor. In several of the large 
grain-handling cities there are laboratories devoted to a 
scientific ajialysis of wheat where samples can be submitted 
and the constituent elements of the grain carefully deter- 
mined. ' ' 

The Board of Control of North Dakota (1915 Eeport to 
Legislature) reached the following conclusion: "It is the opin- 
ion of the board that federal inspection installed on a prac- 
tical, efficient basis would give more uniform grades year in 
and year out and that there would be a general feeling of sat- 
isfaction among the producers in the knowlege that the gov- 
ernment was inspecting, grading, docking and weighing the 
grain. ' ' 

In any event, a state owned terminal elevator would not 
change the present methods of inspection, grading, and weigh- 
ing, A Kansas elevator in Kansas City, Missouri, would IJe 
subject to Missouri inspection, a Dakota elevator in Minnesota 
to Minnesota inspection, and so on. In other words, the mere 
fact of state ownership of the terminal elevator will have no 
effect on inspection, weighing, or dockage. 



278 MARKETING AND FARM CREDITS 

Dockage is growing heavier from year to year, quite nat- 
urally, as the farmers' fields become fouler with weeds. And 
when the imperfect grains and foreign matter are removed 
from the grain an increasing amount of screenings is the re- 
sult. On these screenings the farmer has paid freight and suf- 
fered dockage, and he feels a grievance. Wliat is the remedy 
for this situation? Says the North Dakota Grain Commission 
in its report to Governor Burke, -'keep the screenings at 
home." This operation should be performed either on the 
farm or at the local elevator. 

Here again, it isi hard to see where a state owned terminal 
elevator would remedy the condition. 

Open, Competitive Market 

The North Dakota Bankers' Association in their meetings 
of 1906 and 1907, claimed the farmers of the Northwest were 
not enjoying an open and competitive grain market at the ter- 
minals. Similar claims were made to the industrial commis- 
sion in 1901 concerning the Chicago market. Have conditions 
changed since then? 

The federal government report on the Kansas wheat situa- 
tion (1914) spoke of the condition in these words: "The con- 
trol of the elevator situation by a few powerful companies is 
not an unusual one in the large wheat markets of the United 
States, and it is a question whether it is the ideal condition 
for the grain trade at large." * * * "No evidence was 
discovered" (concludes the report) "of collusion between large 
interests to restrain competition or to depress prices in Kansas 
City. In Kansas City 86 per cent of the terminal elevator ca- 
pacity is controlled by 6 firms, but these firms appear to be 
in competition with each other. ' ' 

On the whole, the grain business now is fiercely competitive, 
according to the findings of the federal Department of Labor 
Bulletin (Bureau of Labor Statistics 130). The situation is 
described in these words : 

" In a survey of the distribution of wheat and flour, three 
things are noticeable : the intensely competitive character 
of the business, the excess in the equipment for distribu- 
tion, and the desire for independence of the people engaged 
in production and distribution. If one farmer will not sell 
Ills wheat at the price offered another farmer will. Local 
dealers, jobbers, and millers bid against each other in buy- 



JAMES. E. BOYLE 279 

ing and selling. Flour is made in the town of A and ship- 
ped by rail to be sold in the town of B, while flour made in 
B is sold in A. A grocer in the east end of town hauls 
flour across the city to a customer in the west end of town, 
and the grocer in the west end delivers to a customer in the 
east end. The Minnesota miller sometimes buys Kansas 
wheat, and the Kansas housekeeper sometimes insists on 
having Minnesota flour. And not only are the products 
crossing trails in distribution, but traveling salesmen of 
many mills and flour jobbers are duplicating their la- 
bors in the same territory. Beginning with production, 
there are more seeding and harvesting machines in the 
hands of farmers than would be needed if there were co- 
operation in production and each machine kept in opera- 
tion the entire harvest season. There are more elevators in 
the wheat area than are needed, each operating most of the 
time on less than its full capacity. In some sections there 
is needless duplication of railroad trackage. More grain 
jobbers and commission men are in the field than can find 
continuous business. It is asserted that the millers of the 
United States could grind all the wheat raised in the United 
States in 144 days. ' ' 

Apparently we are suffering from too much competition 
rather than too much combination. 

When grain prices are high, farmers are satisfied; when 
grain prices are low, they blame, to a large extent, the termi- 
nal elevators. Yet if the government would build a hundred 
terminal elevators and furnish free storage, it would likely not 
change the price of grain by one cent a bushel. World mar- 
kets, operating under known and anticipated conditions of sup- 
ply and demand, determine grain prices in the last analysis. 
All official investigations with which I am acquainted find the 
smallest margins and smallest leaks in the terminal elevators, 
and the biggest leaks and biggest margins at the local eleva- 
tors. Here, says the North Dakota Board of Control report : 
"In this transaction between producers and the buyer 
of the local elevator company, there is no third disinter- 
ested party to dock, grade or weigh the wheat or other 
cereals and thereby determine its actual weight or worth. 
If after a thorough investigation a practical system of in- 
spection and grading could be had for country elevators 
with proper supervision, in our judgment it would elim- 



280 MARKETING AXD FARM CREDITS 

iuate 80 per eeut of the abuses now complained of by the 
farmers of this state." 

Government Owned Terminals 

Canada's experience with government terminal elevators is 
too short to prove anything, one way or the other. Canada 
went into government ownership of elevators under stress of 
■i critical conditions none of which atfect us. namely: (1) lack 
of railroad facilities, both in railroads and care to move the 
crop; (2) great and sudden increase in wbeat acreage a thou- 
sand miles from the terminals; (3) lack of interior storage 
— in conjunction with distance from market and car shortage, 
making necessary the piling of grain on the ground ; {i^ two 
successive grain crops seriously injured by dampness. 

Canada has gone into the government elevator business to 
the foUoAving extent (^ according to the 191-4 report of the De- 
partment of Trade and Commerce, part V, grain statistics) : 

The Dominion terminal at Fort William cost $1,379,400.43 
and has a storage capacity of 3.250,000 bushels. Interior stor- 
age at Moosejaw, cost $1,200,000; its storage capacity is 
3,500,000 bushels. Interior storage at Saskatoon, cost $1,100,- 
000; its capacity is 3,500,000 bushels. Interior storage at Cal- 
gary, cost $850,000 ; its capacity is 2,500,000 bushels. The total 
cost was $4,529,409.43. Total storage capacity, 12,750.000 
bushels ; cost of erection, 35 cents a bushel. 

The cost of operating the Fort William elevator for one year 
(Oct. 16, 1913, to Aug. 31, 1914), not including interest on 
plant or depreciation, was $68,111.35. 

Most of the non-partisan investigations which I have been 
able to discover reach the same conclusions regarding govern- 
ment terminal elevatoi"s, namely, that the experiment is un- 
wise. The Royal Commission of Canada of 190ti has this to 
say on the subject : 

"Requests were made of us in the country that the ele- 
vators at Fort William and Port Arthur should be taken 
over and opei'ated by the government in vieAv of the fact 
that so many of them were operated by private corpora- 
tions interested in the grain trade. We also had a eom- 
mimicatiou from the department under date January 23, 
1907, enclosing a petition of members of parliament ad- 
dressed to the right honorable the premier, requesting that 
we be instructed to specifically 'inquire into and report 



JAMBS. E. BOYLE 281 

whether it is in the public interest that terminal elevators 
* * * continue to be operated by the common carriers 
or allowed to pass into the hands of or be operated by per- 
sons, firms, or corporations engaged in the grain business.' 
In reply to this communication we addressed to the Right 
Honorable Sir Richard Cartwright, minister of trade and 
commerce, a letter dated February 1, a copy of which is 
appended hereto. We can see no reasons for changing the 
conclusions arrived at at that time, and we believe if our 
recommendations are carried out they will give the public 
the same confidence and protection in the operation of these 
terminal elevators as if they were owned by the government. ' ' 

And in the letter to the minister of trade and commerce re- 
ferred to above, the commission says : 

"To prevent the evils that are made possible by the op- 
eration of terminal elevators under the present system, we 
do not think it wise to advise the government to go to the 
length of taking over the terminal elevators or of prohibit- 
ing persons engaged in the grain trade being interested in 
such terminals. We believe it is possible to obtain a good 
service from these elevators under the present ownership 
by having a more thorough system of supervision and con- 
trol." 

To the 800 farmers in 1910 Avho addressed him in favor of 
government elevators, Premier Laurier refused to commit him- 
self for or against the proposition, but he did say that this 
scheme did not go to the root of the problem. 

North Dakota has had 3 separate commissions to investigate 
the problem. The first, made in 1908, (Public Document, No. 
37, 1908) recounted the familiar "evils," especially in the 
local elevators, and recommended among some 10 or 12 things, 
the leasing of terminal elevators at Minneapolis and one at 
the head of the lakes. The second, in 1910 (Public Document 
No, 26, 1910) after complaining of the usual evils of mixing, 
inspection, dockage, and local elevator abuses, recommended 
state-owned terminal elevators at Minneapolis and Duluth or 
Superior. The report also contains the usual booster state- 
ments that ' ' our state produces more wheat on the average than 
any other state in the union," and "our wheat being acknowl- 
edged the best in the United States, ' ' both of which statements 
are amiable errors. 



2S2 MAKKKTING ANP FAUM OUKPITS 

The third repoi't, made in 1015 to the st^\te legislature by the 
moiuhevs of the state hoard of oontrol. after a thorough can- 
vass of the situation in Canada. North Dakota. ^Minnesota and 
Superior. ^Viseousin. eondemued in phiin hniguage the whoU^ 
proposition of state-OAvned tenuii\als. 

Enough Storage Space Already 

Tn no ease is it apparent that the evils eomplaiued of in our 
grain trade would be eured by state-owned terminal eleva- 
tors. 1 have tried to show this step by step. Henee the tre- 
mendous investment necessary to erect anything better than 
insignitieant storage houses l^the Canadian Dominion terminals 
cost oo cents a bushel to erect"* would likely prove a disap- 
pointment as well as a loss. Adequate storage exists at every 
terminal. A glance tlirough the pages of the American Ele- 
vator and Grain Trade of Chicago furnishes evidence enough 
of the growth of tenuinal elevator capacity as fast as the grain 
output increases. And accordu\g to our federal g'overnment 
investigation already cited, we have too many local elevators. 
Hence theiv is no pressure for more storage. Nor is there de- 
mand for cheaper storage, since terminal storage rates are 
regulated by the respective states. 

AVe can aiford to wait a while and watch Canada's experi- 
ence. It will be cheaper to get their experience than to pay 
for our own. Alivat.1%- I have heard run\ors from accredited 
sources that, bad politics is at work in these Dominion eleva- 
tors, tinding jobs for deserving politicians. And we may also 
wait a.nd watch the results of the public elevatoi*s at Seattle 
and New Orleans, and see how wisely these two cities manage 
to use the public funds. Present terminal elevators of modern 
construction ai'e of steel or concrete, and have a capacity of 
from ;> to 10 million bushels. To erect one of o million bush- 
els would cost the state a million dollars or more: a G-million 
bushel house — and this size is more economical to operate than 
a snmller one — would most 2 million dollai*s. If instead of 
spending S or 10 million dolhu*s on these terminal elevators 
the state would vnit the same money in good roads, it would 
confer a great benetit on the farmer, not only by helping liim 
to get his grain to market with a wider margin of profit to 
himself, but it would also cause a permanent ii\crease in the 
land values far in excess of the cost of the improvement. The 
whole commnnitv would be the beneficiaries of such a use of 



J. M. ANDERSON 283 

public fniuls, il' these few millions of dollars be available for 
•expenditure. 

Thirty years ago, the railroads owned and operated the ter- 
minal elevatoi-s, for in no other way could adequate storage 
be found for iluvir grain shipments. Here also abuses of vari- 
ous kinds arose, but there also grew up adequate government 
supervision and control. Now the farmer wants more direct 
control ol' the grain trade, and he is entitled to it. But shall 
he proceed to get it along the lines of government ownership, 
or shall he rather proceed along the lines of self-help through 
cooperation? In short, shall he do as the orange growers of 
California hav(^ done, namely, organize his own marketing ma- 
chinery through cooperation? 

The'farmers' elevators are slowly, year by year, driving out 
the independent and the line elevators. And since self-help is 
always better than government subsidy, the farmers' coopera- 
tive terminal elevator is the next logical step. But even here 
the way of reform is beset with difficulties, for we read in a re- 
cent number of the Grain Growers' Guide of Winnipeg (No- 
vember 17, 1915), the official organ of the cooperative farmers 
of that section, that the farmers have failed to patronize the 
farmers' cooperative terminal elevator at Fort William. 

problems' of a cooperatively owned 
terminal system 

J. M. Anderson 
President, Equity Cooperative Exchange 

I represent here the Equity Cooperative Exchange which is a 
North Dakota corporation, incorporated under the laws of that 
state in 1911. Its capital stock is $50 a share. It has a paid-up 
capital now of $75,000. There are about 1,200 stockholders, all 
of whom are farmers. It's board of directors is made up of 
farmers, all of whom live on their farms with the exception of 
me. My entire tinie is given over to the management of the 
atfairs of the corporation. Our capital stock draws a dividend 
of 8 per cent a year. The balance of the net earnings is pro- 
rated back to the shippers of grain, so we hold that we are a co- 
operative organization. I might say also that our stockholders 



284 MARKETING AND FARM CREDITS 

are entitled to only one vote to tiie man. regardless of the number 
of shares of stock that he holds. 

Such in brief is the nature of our corporation. We began bus- 
iness, the business of grain commission merchants, in 1912. in 
the cities of Minneapolis and Superior, AYisconsin. We handled 
during the first year of our business about 1,800,000 bushels of 
grain. The second year that we operated we handled about 3 
million bushels and last year we handled about 5 million bushels. 
We have handled since the first day of August of this year, in 
other words, in -i months, we have handled about 61^ million 
bushels. So you see we are growing. We handle grain now at 
the rate of about 125.000 bushels a day. and our average daily 
balauces. our bank deposits, are about $130,000. 

Now. gentlemen, we have had some experience in the few years 
that we have been in the business. In the fii'st place, we have 
been charged with dealing in pei-sonalities and your secretary, 
when he wrote inviting us to come here to address this confer- 
ence, asked that we refrain from indulging in pei'sonalities, and 
the letters that we get from the different parts of the country 
asking us to come to address audiences usually carry ^^itll them 
that suggestion. Now, gentlemen, I assure you that it has been 
an unpleasant task to go out in the country" and deal in person- 
alities but we have had to do so as a matter of self-defense. Any 
respectable citizens could not permit themselves to be called the 
names that we who happen to be the officers of the Equity Ex- 
change have been called, and not go out in self defense. 

Interests Fight Equity Exchange 

When we began business in Minneapolis we were denied en- 
trance to the ^Minneapolis Chamber of Commerce, which is the 
board of trade in that city. I speak now of the Minneapolis 
market and the Duluth market, for those are the only 2 mar- 
kets on which we have had any experience. We were refused 
admission and the only thing left for us to do was to set up our 
tables, present our samples of grain and try to get buyers in 
that way, or to go back home and tell the fanners that we had 
failed in our efforts to establish a cooperative selling agency on 
the terminal markets of ^linneapolis and Duluth. And we chose 
the former course. We secured state inspection there in Min- 
nesota, set up our samples and attempted to sell our grain to the 
4 large mills in Minneapolis. They never bought a bushel of 
grain from the Equity Exchange. We have buyers coming to 



J. M. ANDERjSON 285 

our offices in St. Paul now asking if we have any grain for sale 
that is not mortgaged, and when we asked them why they ask 
that question they tell us that they have been told that all the 
grain that the Equity has is mortgaged grain and grain that has 
been stolen. And, gentlemen, in our efforts to establish a co- 
operative market on the terminals we have received no govern- 
ment protection in the hardships that have been worked upon us 
and what we are asking is that the government take charge of the 
big terminal markets and allow the fellows who want to sell grain 
to come there and sell grain without joining any chamber 
of commerce or any other organization. You can go to your 
local market out through the country and sell grain with- 
out joining the commercial club or the ladies' aid, can't you? 
Well, why shouldn't you be permitted to come to the large ter- 
minal markets and sell your grain without joining any board of 
trade or any other organization? And we hope that some day 
we can induce the federal government to prosecute the millers 
who are discriminating against Equity grain because the Equity 
organization is not a member of the regular board of trade. 

Why There is Discrimination 

Now, why don't they buy from us? "We haven't mortgaged 
the grain for sale. There are days in St. Paul when we have as 
much grain as you have here in the city of Chicago. There must 
be something in the minds of those men that kept them away 
from the Equity market, some selfish interest whatever that 
something is. 

Now who are our buyers ? We sell grain to the millers located 
out in Minnesota and Wisconsin and Iowa. We have millers of 
St. Louis on our market now buying grain. The day before I 
left, the day I left, day before yesterday, an exporter from St. 
Louis came to buy Equity grain. Whenever a new buyer comes 
to us we ask him why he comes. And they usually say, ^'We 
come to this market because we want to get the grain in its 
original state and the grain as it comes from the country, un- 
mixed," One miller told me that he wasn't permitted to come 
near the tables in Mjinneapolis where he could buy that grain. 
He said the only grain he could get was elevator grain. 

"Well, I said, ''why don't you want elevator grain?" He 
said, 

' ' Because it has been mixed. ' ' 



286 MARKETING AND FARM CREDITS 

If you will go on the Minneapolis market von will find that ele- 
vator grain sells from 1 to 2 and 3 cents per bushel less than grain 
on track will sell for because the grain on track has not been 
mixed. And one of the reasons that we want either government 
elevatoi-s or cooperative elevators on the terminal markets is to 
provide a place where grain can be stored and be assured that it 
"v^dll not be mixed while it is in storage. 

A DiiEcult Storage Problem 

There is the matter of storing grain. You can't store grain 
in the public terminal elevators where mixing is permitted 
without that grain depreciating in market value. And Avhat 
you want is elevators in which grain cannot be mixed. 

Then there is another phase of the storage question that is 
being debated very much in the spring wheat district of the 
Northwest, namely the selling of store wheat. In our agricul- 
tural college at Fargo, or under the supervision of that college, 
a number of experiments have been carried on for years to as- 
certain what it costs to produce wheat in the State of North 
Dakota. And Mr. Palmer, I believe, is the man having this 
in charge. Isn't that right, Mr. BoUey, Mr. Palmer? 

iMr. Bolle}': He may be given the summaiy of it, but they 
come from several sources. 

Mr. J. M. Andei-son : I think it was Mr. Palmer w^ith w^hom 
I spoke at any rate. 

Mr. Bolley : I presume that is right. 

Mr. J. M. Anderson: Mr. Palmer told us that the farmers 
in North Dakota should receive at least S6 cents per bushel 
for their wheat if they were to make any profit at all. Now, 
it isn't very often in North Dakota and Western Minnesota 
that the farmers receive 86 cents per bushel in their local mar- 
ket. They are compelled to sell at less, and one of the reasons 
why they are compelled to sell is that their debts mature in the 
fall of the year. They are paying, as w^as illustrated here by 
charts, all the way from 8 to 10 and in some places they liaA^e 
been paying 12 per cent interest, in North Dakota. There 
isn't very much inducement to those men to leave their wheat 
back home is the bins and pay interest on the monej^ which 
that wheat represents, pajdng 10 per cent interest and holding 
their wheat for higher prices. And for that reason we want a 
public storage system where these men can store their wheat 
and take their storage tickets to the bank as collateral security 



J. M. ANDERSON 287 

and obtain money on them at the 4 or 5 per cent interest rates 
at which money can be secured on terminal warehouse receipts 
as collateral. 

Cooperative Ownership a Hope. 

Now, gentlemen, it may be that we can get those elevators 
through private initiative. In the state of North Dakota this 
matter has become a religion, as our friend, Doctor Boyle, with 
whom I formerly went to school, has told you. But North 
Dakota is just a great big farm, doctor; that is, all we have 
up our way is agriculture and good schools. And we believe that 
the state should experiment with seventy-five or a hundred 
thousand dollars in the establishment of a government .ele- 
vator in the terminal markets, if, for nothing else than to fur- 
nish a storage place for the farmers where grain cannot be 
mixed. 

Now, the matter of cleaning grain has been discussed here. 
Of course, the place to clean it is out at the local elevators. 
But most of those elevators handle in our state from 2000,000 to, 
in some instances, 400,000 bushels of grain each year ; and they 
haven't the room for cleaning. "We get grain on our tables 
in St. Paul that has a dockage of 10 or 12 pounds to the bushel, 
and in most instances we have to give that dockage away, 
whereas, if we had an elevator and could clean it there the 
dockage could be saved to the shipper. 

Mention has been made of the terminal elevators. "We have 
had some experience with the elevators in Minneapolis. In 
1913 we received an order from the railroads in Minnesota for- 
bidding their cars to go to other points, to points located on 
other roads than their own. That is, if we sold a Great North- 
ern car to go to La Crosse, Wisconsin, located on the Burling- 
ton, that we Avould have to transfer the contents of that car to 
some other car. In other words, the Great Northern lines 
wouldn't let their cars go on. The only place where we could 
have a transfer made was in an elevator. We received some 
orders from all the railroads entering the Minneapolis market 
on the same day. 

,We had some 75 cars on the Minneapolis market. We went 
to the elevators and asked them to transfer this grain for us, 
and they turned us down. Not a single car would they trans- 
fer. And there we were. It looked like a blockade. We 
telegraphed the situation to Senator La Follette at Washing- 



288 MARKETING AND FARM CREDITS 

ton, "vvlio took tlie matter up with Commissioner jMarble, one of 
the best men that was ever a member of the Interstate Com- 
merce Commission. When Mr. Marble had heard the facts he 
sent an order to all of the railroads in Minnesota ordering 
them to let their ears go on as usual. I mention this because 
it illustrates that these public elevators are not always at the 
service of the gi'ain dealers, and not always at the service of the 
shippers. 

Problems of Finance 

Now, the matter of financing. We have had some experience 
in that line. When we started business in Minneapolis there 
was only one bank that would furnish us any money. Only one 
bank that would furnis'h any credit to the Equity, and that bank 
furnished $50,000. That was all that we could get anywhere. 
We had good paper. We had promissory notes bearing 8 per 
cent interest, carrying the name of the corporation, signed by 
its officers and endorsed by the directors on the back of the note, 
each director endorsing or signing as individual surety. We had 
$100,000 of that kind of paper, but no banks would take it. It 
was then that we moved to St. Paul. The St. Paul banks said, 
' ' Bring your paper to us. If you will come to St. Paul to mar- 
ket your grain, we will finance you on that kind of security." 
We moved to St. Paul a year ago last August. We are borrow- 
ing from the St. Paul banks now in the neighborhood of $400,000 
a day used in the financing of grain. 

This, briefly stated, gentlemen, has been our experience on the 
terminal markets. And, briefly stated, I would say this, that the 
federal government should take charge of the big terminal mar- 
kets and make them open markets, permitting anybody to go 
there and sell grain or buy grain or the product^ of grain. The 
federal government should see to it that it is unlawful to mix 
grain in any elevators. And I believe, too, that the federal gov- 
ernment should build at least one good sized terminal elevator 
at Chicago, Minneapolis, Duluth, and at some other grain mar- 
ket, just to give the fellow who is pinched by the other crowd an 
opportunity to come in and get his elevator service. Had there 
been such an elevator in Minneapolis at the time that we were 
denied elevator transfer privileges in ]\Iinneapolis, we would 
have felt a whole lot better, a whole lot better than we did. As it 
is, the federal government came to our aid through the order is- 
sued by Mr. Marble of the Interstate Commerce Commission. 



J. M. ANDERSON ^ 289 



Warehouse Certificates Should Be Recogfuized By Federal 
Reserve System 

And, then, again, I believe that the federal government should 
accept the terminal warehouse receipts as collateral in the fed- 
eral reserve banks. They are accepted as collateral for loans in 
those banks at the present time, but the application for loans 
must come through some banker, and thus far we have been un- 
able to induce any bank to ask for loans from the federal re- 
serve bank. I wish it were possible for the farmers or credit 
associations or something that is under the control of the farmers 
to go to the federal reserve banks and get the money when the 
other banks have turned them down. 

What it Costs to Handle Grain in Terminals 

Just a word now in regard to the cost of handling grain on 
the terminal market. Through the interesting times that we 
have had in the Northwest in the past 3 years we have spent 
considerable money. Our little corporation had only $42,000 of 
paid-up capital on the first of August this year. We had a defi- 
cit staring us in the face of $33,000. That is, we were that far 
behind in the game. We have made as a net profit since the first 
of August over $40,000 in handling about 6 millions bushels of 
grain. ^ I believe that grain can be handled on the terminal mar- 
kets for less than a quarter of a cent per bushel as a commission 
leaving the other three-quarters to be rebated back to the ship- 
pers of grain. If that amount were saved by the farmers of 
North Dakota alone each year it would yield them over a mil- 
lion dollars as a net profit. 

Gentlemen, we are trying to solve these problems there on the 
terminal markets for ourselves. We are so well under way now 
that Ave believe we are -going to succeed. We are able to pay an 
accumulated dividend of 8 per cent now. And if that is the 
measure of success of the corporation you can. see that the Equity 
Exchange has been a success. We believe that in the very near 
future Ave will have provided a system of marketing whereby the 
farmers can control their grain while it passes from the farms 
to the mills. 

19— M. F. c. 



290 MARKETING AND FAR:M CREDITS 



THE GRAIN GRO\\'ERS OF WESTERN CAN- 
ADA AND THE MARKETING OF THEIR 
OWN GRAIN 

Geokge F. Chipmax 
Editor, Grain Growers' Guide 

The history of the organized grain growers of Western Can- 
ada is a record of struggle and achievement to bring about im- 
provements necessary to give the farmers a square deal in the 
grain trade. They have had to fight every inch of the way 
against the most powerful and best organized interests in Can- 
ada. Steadily, however, for the past 15 yeai-s they have made 
progress until today the grain growers' organizations of 
Manitoba, Saskatchewan and Alberta are one of the biggest 
factoi*s in the commercial, economic and political development 
of the Dominion. 

(Prior to 1900 there was no government regulation nor con- 
trol of the grain trade. The Canadian Pacific Railway which 
was then the only railway in Western Canada and the line ele- 
-vator companies had complete control of the marketing of the 
grain. All the country elevators were built on sites leased by 
the railway company and there was an agreement with the rail- 
way company that they would not furnish cars for the ship- 
ment of grain except to the elevators. The result was that the 
elevator companies had a monopoly and that they used that 
monopoly to oppress the farmers most shamefully. The farmer 
who hauled his wheat to the elevator was forced to accept the 
weight, grade, dockage and price that the operator might offer, 
and there was no appeal from the decision of the elevator com- 
pany. Many a farmer who saw himself robbed of from S cents 
to 10 cents a busbel on his wheat was informed that if he did 
not like the system he could haul his grain home again. This 
condition of affairs continued with little improvement until 
the year 1899. At that time in response to the protest of the 
western farmers the federal government appointed a royal 
commission to investigate conditions and to recommend legis- 
lation. As a result of the work of this commission the Mani- 
toba grain act was passed by the federal Parliament in 1900 
for the res-ulation of the erain trade of Western Canada and a 



GEORGE F. CHIPMAN 291 

warehouse commissioner was appointed to administer that act. 
Under the Manitoba grain act every grain company was li- 
censed and bonded for the protection of the farmer and pro- 
vision was made for the erection of loading platforms over 
which the farmers could load their grain into cars and become 
independent of the elevators. The loading platform provision, 
however, was a dead letter, because there was nothing in the 
act to compel the railway companies to supply cars to the load- 
ing platforms when the farmers required them. 

Farmers Organize to Secure Relief 

The Manitoba grain act of 1900 brought some relief, but the 
farmers saw that it did not break the monopoly of the eleva- 
tor companies and they determined to organize in self-defense. 
The Grain Growers' Organization was started in 1901 in Sas-V- 
katchewan and rapidly spread all over the 3 provinces^.* 
The associations were all organized in local groups with local 
officers and these again organized into provincial organizations , 
with provincial officers. Prom the time this organization be- 
gan the farmers made know, their demands to the Dominion, 
government in no uncertain sound. 

In 1903 the farmers' representatives waited on the lOttawa 
government and asked for amendments to the grain act giving 
the warehouse commissioner power to force the railway com- 
pany to build loading platforms and to supply cars to the 
farmers who required them. The elevators and the railway 
company were successful in opposing this demand. In 1906,. 
however, the Grain Growers' organizations had increased very- 
much in numbers and another delegation was sent to CM;tawa.. 
This time the government appointed another royal commission 
to look into the conditions in Western Canada. At the hear- 
ings of this commission the farmers piled up evidence show- 
ing the need of the loading platform which was finally recom- 
mended by the commission. Again at Ottawa in 1908 the or- 
ganized grain growers pressed their claims upon the govern- 
ment and at the conference in Ottawa at that time they were- 
opposed by the elevator interests, the railway interest and the- 
bankers' association. 

But so strong was the farmers' case that the government 
yielded to their demands. The grain act was amended so that 
the railway company was forced to build loading platforms 
wherever there were 10 farmers who wishedl tO) use it, and the 



.292 MARKETING AND FARM CREDITS 

a-ailway company was forced to supply cars for the loading^ 
platform as the farmers required them. A car-order book was 
provided at each shipping point in which every farmer requir- 
ing a car entered his name and the local elevator was allowed 
one ear in turn with the farmers. Heavy penalties were pro- 
vided against violations of the act, and from that time on there 
lias been very little trouble over the loading platform. The 
railway company did not accept the new order of things with- 
'out a struggle, but after being prosecuted and fined for vio- 
lating the act they fell into line and gave little further trouble. 

Birth of a Central Selling Agency 

While the struggle over the loading platform was continuing 
the organized grain growers were pressing for improvements 
in other directions and steadily strengthening their organiza- 
tion. They found that men could not be made honest by law, 
•and, after careful consideration, they decided that the only 
vray to correct the evils of the grain trade was by going into 
the business themselves. As a result, the Grain Growers' Com- 
pany was organized in 1906 as a commission firm. It had very 
small capital and was not regarded seriously by the grain 
trade. In fact, the farmers' company was allowed to purchase 
a seat on the grain exchange without opposition. 

Business began to flow to the new company in considerable 
Volume and this aroused the antagonism of the organized grain 
trade who realized that the farmers' company must be nipped 
in the bud or it would be dangerous. The Grain Growers' 
Grain Company had announced its intention of distributing 
profits on the cooperative basis. The grain exchange seized 
upon this as a pretext and suspended the farmers' company 
from membership in the grain exchange in the first year of its 
operations. The bank with which the farmers' company was 
doing business, to make the funeral of the company complete, 
withdrew its credit. The farmers' business organizations of 
Western Canada at that time were nearly snuffed out. A 
'number of farmers got together and by pledging all their prop- 
erty succeeded in securing sufficient credit to carry the small 
stock of grain on hand. 

The Winnipeg Grain Exchange which received its charter 
from the Manitoba legislature was brought to time in a differ- 
ent manner. The Manitoba Grain Growers' association, num- 
bering 6,000 or 7,000 farmers at that time, approached the 



GEORGE F. CHIPMAN 293'" 

Manitoba government and demanded that they come to the 
rescue. The government requested the grain exchange to re- 
instate the farmers' company, but without avail. The Grain 
Growers' Association continued its pressure on the govern- 
ment and finally the premier of the province served notice on 
the Winnipeg Grain Exchange that if the farmers' company 
were not reinstated to the full trading privileges of the ex- 
change he would call a special session of the legislature and 
cancel the charter of the exchange. Under this threat the 
grain exchange reinstated the farmers ' company and from that j 
time on the Grain Growers' Grain Company has been a mem- 
ber of the Winnipeg Grain Exchange. Finally arrangements 
were made with a small eastern bank by which the farmers ' , 
company was enabled to continue its business, and this bank! 
has continued since to finance the company. 

Breaking Exchange Monopoly 

At the next session of the Manitoba legislature the farmers- 
demanded amendments to the grain exchange charter which 
would break its monopoly and give the farmers better treat- 
ment. As a result the legislature amended the charter radi- 
cally. In fact the grain exchange refused to work under the 
new charter and has ever since operated as a voluntary or- 
ganization with no legislative charter, but they had learned 
their lesson and have never since attempted to expel the farm- j 
ers' company from their organization. 

But the organized elevator interests were not so easily dis- 
couraged. They established in 1909 a secret publicity bureau | 
in charge of an able writer. The purpose of this work was to- 
throw suspicion upon the men at the head of the farmers' com-] 
pany and bring about disruption and internal strife in the- 
farmers' organization. They purchased space in the farm pa- 
pers in which they published these articles. The Grain Grow- 
ers' Guide, however, exposed the plot of the elevator interests 
with the result that the farmers cancelled their subscriptions 
to the papers publishing these articles and in less than a monthi 
the whole publicity scheme was destroyed. 

The next attempt on the part of the elevator interests to de- 
stroy the farmers' company was in 1910. The commission rule- 
of the Winnipeg Grain Exchange was that every grain com- 
pany should charge 1 cent per bushel on all grain handled.. 
Suddenly this commission rule was suspended entirely and the- 



294 MARKETING AND FARM CREDITS 

elevator companies set out to handle the farmers grain at i/'o 
cent and many of them handled it for nothing, the purpose 
being to draw the grain away from the farmers' company. At 
that time, however, the Grain Growers' Grain Company had 
thousands of farmer shareholders and had become the largest 
commission firm on the exchange. The company took a ref- 
<?rendum of its shareholders and 98 per cent of them recom- 
mended maintaining the 1 cent per bushel commission. In 
1909 the company handled 7,500,000 bushels, and in 1910 this 
jumped to over 16.000,000. The grain exchange realized that 
the farmers were not to be fooled in this way and the commis- 
sion rule was restored and has since remained in effect. 

How a Farm Journal Helped 

During the days of their early struggle the grain growers 
realized the need of having their own journal through which 
to reach the farmers of the country. It was with this end in 
view that the Grain Growers' Guide was established in 1908 by 
the Grain Growers' Grain Company. The men who brought 
the Guide into existence ihad had no experience in the publish- 
ing business and little realized what it would cost to maintain 
a fearless and outspoken journal until it should be upon its feet 
financially. During the first year of its existence the Guide 
was published as a monthly and reached a circulation of 6,000 
or 7,000 at a financial loss of $16,000. It was then turned into 
a weekly paper which it has since remained and has been em- 
ployed as the ofl&eial organ of the three farmers ' organizations 
in the prairie provinces. 

In less than 8 yeai-s the Grain Growers' Guide has reached 
a circulation of 35,000 which is considerably larger than that 
of any other farm journal in the Dominion of Canada, and 
the Gutid£ has reached the position where it is practically in- 
dependent financially. The Grain Growers' Guide has beeu 
the big educational medium in the work of the farmers' or- 
ganizations. It has been the fearless champion of the farm- 
ers' rights and has undoubtedly been one of the most import- 
ant factors in building up all the farmers' organizations and 
senabliug the farmei's to work together for a common purpose. 
The Grain Growers' Guid^ since the fii*st year has been incor- 
porated as a separate company and is published in a $150,000 
plant which is the property of the organized grain growers. 



GEORGE F. CHIPMAN 295 



Beginning the Fight Over Terminals 

In pursuing their work for the improvement of the grain 
trade the organized grain growers from the very beginning 
demanded that the country elevators as well as the terminal 
elevators be taken out of the hands of private parties and op- 
erated by the governments as public utilities, the cost of main- 
tenance to be provided by charges on the grain passing 
through. The grain growers demanded that the country ele- ^ 
vators be operated by the provincial governments and the ter- / 
minal elevators by the federal government. These demands 
were steadily refused by the various governments until the 
year 1910 when in the province of Manitoba on the eve of a 
general election the government yielded and adopted the policy 
of publicly owned elevators. 

The purchase of these ^levators was carried out in the most 
corrupt fashion, prices being paid from 25 to 100 per cent over \ 
the actual value of the elevators. In all 176 elevators were 
purchased and were operated under the commission for 2 
years. At the outset the government never intended to make 
a success of the elevators and at the end of 2 years heavy 
loss had been met with. The commission was abolished and 
since that time the Manitoba government elevators have been \ 
operated by the Grain Growers' Grain Company under a lease I 
and have shown a profit on their operations. Just in passing 
it might be mentioned that 4 of the cabinet ministers of the 
government which made the corrupt elevator purchase were a 
few weeks ago committed to stand trial before the criminal 
assizes on the charge of conspiracy to rob the public treasury. 

The Dominion government steadily refused to take over the 
terminal elevators although the grain growers declared that 
they were being operated by the elevator companies in a man- 
ner which robbed the producers of a very considerable margin 
of profit. The government, however, did institute an investi- 
gation which showed that grades were being mixed in the ter- i, 
minal elevators contrary to the law and three of the terminal 
elevator companies were fined. Prior to the federal election 
of 1911 the opposition party pledged themselves to public own- 
ership of elevators, and when it came to power as a result of 
the election in that year it partly fulfilled its pledge. The 
Dominion government has erected one Si/o million bushel termi- 
nal at the head of the lakes and 3 interior storage elevators 
with a capacity of 31/. million bushels each in Saskatchewan and 



296 MARKETING AND FARM CREDITS 

Alberta. A new grain commission has been appointed to admin- 
ister what is now known as the Canadian grain act, and ware- 
house receipts at the terminal elevators are registered both in- 
ward and outward which prevents the mixing of grades. It 
was in connection with the demand for public ownership of 
government elevators that the organized farmers sent a dele- 
gation of 800 of their representatives to Ottawa to interview 
the government in December, 1910. A special train was sent 
from the West and the delegates gathered from Nova Scotia 
to British Columbia. As a result of that delegation the only 
important thing that happened was the reciprocity agreement 
concluded with the United States government, of Avhich you 
are all aware. 

Another Boyal Commission 

The Saskatchewan government instead of adopting the pol- 
icy of publicly owned elevators appointed a royal commission 
to investigate. The royal commission habit is very strong in 
Canada and is the customary method employed by govern- 
ments for shelving vexed questions. In this case, however, the 
royal commission brought results and in 1911 the Saskatche- 
wan Cooperative Elevator Company was organized as a farm- 
ers' company absolutely with shares at $50 each with the prin- 
cipal of one-man one-vote provided for in the charter. The 
shareholders paid 15 per cent on their stock and the govern- 
ment advanced the remaining 85 per cent to be repaid in later 
j'^ears. The Saskatchewan Farmers' Company at once began 
to erect elevators, selecting chiefly at the beginning those 
points where there was no elevator facility. Today this com- 
pany has 230 elevators in operation and is now the largest ele- 
vator company in Western Canada. The Saskatchewan gov- 
ernment guarantees the credit of the company for the purchase 
of grain which puts it in a very strong position financially. 
The Saskatchewan Cooperative Elevator Company is a mem- 
ber of the Winnipeg Grain Exchange and maintains a commis- 
sion branch in Winnipeg. This year it is expected that the 
Saskatchewan company will handle over 30,000,000 bushels of 
grain. In 1913 the farmers of Alberta in cooperation with the 
government of that province organized the Alberta Farmers' 
Cooperative Elevator Company along the same lines as the Sas- 
katchewan company was organized and assisted by the govern- 
ment to the same extent in the construction of its elevators. 



GEORGE F. CHIPMAN 297 

The Alberta Farmers' Company now operates 87 elevators and 
is this year handling a very large proportion of the crop of the 
province. 

Taking Over the Terminals 

In addition to the 175 country elevators operated by the 
Grain Growers' Grain Company in Manitoba that company 
also operates under lease a 21/2 million btishel terminal at the \i^ 
lake front as well as a hospital elevator at the same place. By 
an arrangement between the Grain Growers' Grain Company 
and the Alberta Farmers' Cooperative Elevator Company, the 
Grain Growers' Grain Company markets the grain handled 
through the Alberta elevators and a large proportion of the 
grain from the Saskatchewan company also passes through the 
Grain Growers' Grain Company terminal elevator. There has 
been keen demand on the part of the farmers of "Western Can- 
ada for their own organization to go into the export business. 
As a consequence of this demand the Grain Growers' Grain 
Company entered into the export business several years ago, \ 
but owing to inexperience the company sustained a loss in 2\ 
years' operations of nearly a quarter of a million dollars. De- 
spite this, .however, the export end of the business was re-or- 
ganized and placed in charge of one of the ablest grain export- 
ers on the continent, with the result that last year the Grain / 
Growers ' Export Company earned a profit of over $500,000 and 
is still continuing in the export business on a large scale. 
/^To sum up the situation briefly in Western Canada today, 
there are 3 farmers' companies operating 492 country eleva- 
tors, 1 terminal elevator and 1 hospital elevator, and 1 export 
company. These 3 farmers' companies have total assets of 
$4,500,000 and a paid up capital of $1,500,000. They have 
35,000 shareholders and are all protected by the principle of 
one-man one- vote so that they can never come under the domi- 
nation of capitalistic interest. During the period of their op- 
eration these farmers' companies have handled over 250,000,000 
bushels of grain and have earned a net profit on their opera- 
tions of over $1,600,000. They will this year handle approxi- 
mately 70,000,000 bushels of grain and within a few years it 
is safe to predict that half of the crop will be marketed by the 
farmers themselves. In addition they have the largest and 
most widely circulated farm journal in Canada. 



298 MARKETING AND FARM CREDITS 

Plans are now afoot to federate all these farmers' companies 
in order that their great financial and trading power may be 
used to the full benefit of the farmei"s whom they represent. 
There is also considerable agitation among the farmers for the 
establishment of grain growers' flour mills, which will proba- 
bly be undertaken in the near future. 

The exorbitant freight rates on lake and ocean during the 
past 2 years have also given rise to the idea that the organ- 
ized farmers must sometime establish their own line of steam- 
ships for the transportation of their grain. This is a much 
larger project and is only now in the discussion stage. 



STATE AID TO LAND PURCHASE 



THE IRISH LAND PURCHASE SYSTEM AND 
ITS APPLICATION TO AMERICA* 

Charles W. Holman 
Secretary, National Conference on Marketing and Farm Credits 

I am assigned to discuss the problem of turning the farm rent- 
ers of America into home-owning farmers. I have been asked 
to discuss one phase of that great problem, namely, state aid in 
the matter of legislation and state control in the administering 
of land purchase schemes. I have been asked to limit my dis- 
cussion to the work of Ireland, to trace for you the story of land 
purchase in Ireland as I grasped it in a first hand study on Irish 
soil, and to suggest, so far as I am able, the lessons which Amer- 
ica might learn from Ireland, — a country whose travail was 
borne of maladjustment of the population to the land and a sys- 
tem of land tenure that was iniquitous in the extreme. 

In my humble opinion, there are great and valuable lessons to 
be learned from the experience of the Irish. For we of America 
are permitting ourselves to slip into the condition from w^hich 
the Irish were able to wrest themselves only by the exercise of 
the most arbitrary powders of government in the interest of the 
social welfare. 

Land Question Is the Root Issue in National Preparedness 

It is unnecessary, of course, to call your attention to the fact 
that America is undergoing many deep-seated, subtle changes. 
The business world recognizes this and the farming world is 
coming to recognize it. The nations are in struggle. Their 
leaders know that the strength of nations must come from the 
developing of what, for lack of a better term, we may call mus- 
cular control. That, in nations, means the coordination of the 
agricultural with the industrial groups and the ability of gov- 
ernments quickly to organize both food supply and man supply. 
Their leaders have learned that the basis of this strength comes 
from the organization of the agricultural interest. They have 
learned that the best way to organize the agricultural interest is 
by the encouragement of the cooperative movement; for the co- 

* Copyright 1916 by Charles W. Holman. 



302 MARKETING AND FARM CREDITS 

operative sooieties are the uuit'orui rank of the fanner forces* 
And these orgimizatious in Europe t^xlay ai*e staiidiusr the test 
of the greatest of eeononiie crises; they ai*e proving themselves 
efficient instruments of their governments in the organization 
and distribution of nations* f«.x>d supplies. 

TVith such conditions sharpening the wits and developing. to> 
a high point, the business efficiency of the agricultural intei*est 
of competitive nations, theiv can be no doubt that it is time for 
the American people to consider the agricultural problem as hav- 
ing an aspect that is grave and of deep portent. It is time to 
take stock of our I'esources. It is time to depart from our char- 
acteristic habit of viewing national questions in a personal way 
and to consider what is to be done for the common welfare. This 
implies and necessitates change : and it seems to me that the basis 
of all this change must lie in a moiv normal and wholesome pol- 
icy of distributing of our present farm populatioi\. and the popu- 
lation that must become farmers, over the land. I cannot but 
think that whatsoever change or transformation that may come 
about in this gigantic etfort of America to idealize muscular con- 
trol, it must rest upon this needed readjustment, and upon the 
civation of social checks to prevent further maladjustment of 
our population to our land. 

The solution of the laud question is the root issue in national 
pi-eparedness for America, whether this prepaivdness be of a 
commeivial or military cast. It is the only possible way of 
building a high type of agricultural efficiency, the basic element 
of a nation's strength. 

Ireland — The Land and the People 

The history of Ireland is more closely associated with struggle 
for the land thtm perhaps is that of any other nation ; for, un- 
like their British neighbors, who have btvu a noted seafaring 
folk, the Irish have had a lesser gift for the st\i. They are pecu^ 
liarly a land loving people. And their traditions, bom of the 
imaginative temperament associate themselves Avith intense local 
ties and attachment to the soil. Their earliest form of organiza- 
tion, when history lifts the veil upon the primitive life, is one 
based upon clan aiul sept organization of the people and tenure of 
the land. 

It was the disruption of this type of organization and the sub- 
stitution for it of the Xorman feudal life, to be followed bv the 



CHARLES W. HOLMAN; 303 

forcible eviction of Celtic peoples from their soil as possessors, 
and the later turning of them into tenants paying rents to alien 
owners, that began the story of Ireland's woes. 

It was continued oppression centering upon the ownership of 
the land and extending even to efforts on the part of England 
to extinguish language, custom and religion and industries that 
prolonged the struggle for 7 centuries. That struggle culmi- 
nated in the complete prostration of the country, and thousands 
of people died along the roadsides, because an iniquitous system 
of land tenure had developed a one-crop system and that one- 
crop system had failed ! 

That prostration is still known as the ' ' black famine ' ' of 1845- 
49. It was followed by a series of years in which good crops 
would follow bad crops. In the years of good crops, the landlords 
raised the rents, and in the succeeding bad years, the tenants 
fell into arrears. It was inevitable that the tenants came to 
consider the landlords as typifying England; that discontent 
and hopelessness should quickly fire into sporadic rebellions. 
The tenant folk revolted. They burned the landlord's prop- 
erty and they assassinated the landlords themselves. Secret or- 
ganizations were formed which, in later years, flowered into the 
Agrarian revolution led in the name of the Land League, by 
Davitt and Parnell, and their associates. 

It was this pitiable plight of the Irish peasantry, together 
with their forcible resistance of the rent collectors and the evic- 
tion bailiffs that caused the English government at last to recog- 
nize the great injustice which had been done and to take steps 
leading toward a national restitution. 

But an idea of the depleted condition of Ireland even today 
is essential to an understanding of what the English govern- 
ment has done; why it was necessary and what are the results 
that we may expect. 

Ireland is a country of about the same size as the State of 
"Wisconsin. Because of this policy of oppression and the lack 
of landlord regulation, the extreme poverty of the population 
forced a decline from 8,801,827 in 1821 to 4,390,219 in 1911. 
There has also been a decline in the birth-rate and a decline in 
the size of the Irish families. In 1821, the average Irish family 
numbered 5.18, in 1911 it had decreased to 4,82. So from this 
very decline of birth-rate, we may glimpse the tragic economic 
pressure that caused the young people to go away. 



304 MARKETING AND FARM CREDITS 

A Land of Empty Houses and Aged Men 

That exodus has left its mark upon the Ireland of today. The 
dilapidated house with the unshut door tells of those who once 
lived there but went out into the world. The empty home is the 
common sight, for the inhabited houses have decreased from 
1,328,839 in 1841 to about 861,000 at the present time. There 
were 4,278,000 who went away in the period marked between 
1851 and 1913. They were the best of the land — they were the 
young men and the young women. Behind them they left their 
country to be reckoned as the land of aged folk. For Ireland 
contains an abnormal proportion of the old. There are 203,000 
persons, or 5 per cent of the entire population who are drawing 
old age pensions from the British government. These pensions 
are given only to persons of 70 yeai*s of age and over whose in- 
come is less than about $18 a year. 

What wonder is it that the liquor-selling public houses have 
increased in Ireland, when there are none left to support the 
widows. But how depressing to view the extraordinary increase 
of the small traders in the to^ns and of the traveling traders or 
peddlers in the country districts. In the face of this declining 
population, the trader class has increased from about. 71,000 in 
1881 to 112,000 at the present time. Thus, you will see that the 
classes which bridge the gap between consumer and producer 
have been multiplying beyond the need of the country, and their 
increase has intensified the strain that is put upon the produc- 
tive occupations. In some cases this middleman class has ob- 
tained a strangle-hold on the farmers, getting them in debt, 
charging ruinous credit prices and Shylockian interest rates, 
earning for themselves the opprobrious name of "Gombeen" 
men.* 

How the Irish Use Their Land 

In England, the average size holding is 72 acres ; in Scotland, 
177 ; in Wales, 67 ; but in Ireland, the average size holding is 33 
acres. The land of Ireland is di\dded into very small tracts. 
It might be called a nation of little landers, because about half 
the occupiers live upon holdings that are 15 acres or under in size. 
Of the remainder there are 2 farms out of every 5 of between 15 



* This name is derived from the Irish. "Gromb" means a fly, and 
'een" is the diminutive. 



CHARLES W. HQLMAN 305 

and 30 acres, while about an equal number vary from 30 acres to 
100 in size. 

Qnly 11 per cent of Ireland's acres ever receives the point 
of the plow, and part of that is in meadow land. Permanent 
pasture comprises 50 per cent of the entire acreage ; the balance 
of the acreage is in woods, waste, bog, mountain and water. 

In some respects, Ireland might be compared with Texas or 
any western state ; for it is a country with a farm population con- 
centrated in some parts, but at the same time it has a ranching 
population, because the small farms are really small pastures, 
and the farmers of that country have gone in for the pasturing 
of their cattle, rather than the tilling of the land. 

At the same time, there is a maladjustment of the population 
to the land. In the western parts of the country, there is a 
serious congestion. There many families have found themselves 
located upon land that is insufficient, either in quantity of acres 
or in fertility of soil to support the population. Yet in these 
particular sections, occurs a most noticeable tendency to cut 
up the holdings still further. That brings about a peculiar 
situation, whereby a large proportion of the people in these dis- 
tricts are really farm consumers, because they must be supported 
from other sources than their holdings. They move annually 
from the western districts to the richer lands of Scotland and 
England, where they work on the big farms. They usually stay 
about 5 months of the year and come back to their little cab- 
ins Mdth their small hoards to spend the winter. The straggling 
crops which they have planted in those sections are cultivated 
by the women and the children, to be gathered by the men when 
they return. 

Problem of Expenditure in Congested Districts Like City- 
Laborers' Problem 

So we may see that in these districts, one has a problem in 
the disbursement of family funds, rather than in the increasing 
of family income ; for these people are in a position analagous to 
that of the wage laborers of our industrial centers. Their chief 
concern is getting enough money together for a living, then 
cutting the cost of this living down to a minimum. Hoav differ- 
ent is that problem from the one that faces the American farmer, 
who, because of the unformed, unorganized conditions, still has 
the problem of increasing his income and is not overly burdened 
with concern as to its expenditure. 

20— M. F. C. 



306 MARKETING AND FARM CREDITS 

Yet iu the ""Western AYoiid"'. as the natives eall that section, 
there is a keen hiiuger for land. Families aiv crowded on 
i*oek-ribbed. barren coasts ; one will pass holdings where attempt* 
have been made to build the land out into the sea. The sea- 
weed is gathered to build soil, and the kelp is burned to eke out 
family incomes. But the right to land. — to a piece of the land, — 
is clearly the strongest demand of the Irish heart, and the trag- 
edy of Irish life concerns itself largely with the leaving of the 
neighborhood .where the Irishman was born. 

On all side§ one is conscious of poverty, of depletion, of tilth 
and of ignorance. Such scenes strike one to the heart as the 
price. — the fearful price — tha^ Ireland has paid in her 7-cen- 
tury-old tight to regain possession of Celtic soil, to make a tii*st 
step toward national unity based upon economic freedom, and to 
seize a fighting chance for political autonomy. 

A National Dramatic Stnigg-le 

The griTU paradox is that Ireland has reached the depths of 
her shadowed valley and begiiu the long ascent toward the 
National Ideal. She has iv-gained the land : the people who 
were originally dispossessed have come into their own. As a re- 
sult, everywhere one may find the germ of change, of iv-awaken- 
ing; every whei*e one may sense the dawning of the Irish Renais- 
sance. We may indeed with some aptness, picture this right of 
the people as a national dramatic struggle in which the fight 
for the land is the enveloping action, while out of it, now that it 
is settled, have sprung 3 yottug. fighting forces, struggling with 
the Past. 

The first of these forces at the command of Yoimg Ii*eland, is 
the economic force. It is symbolized by the cooperative move- 
ment which has fiowered into over 1.000 oi*ganizations. repre- 
senting over 100.000 farm families. 

The second force is that movement to bring up the living 
standards of the Irish home. It concerns itself with the train- 
ing of Irish women in the household arts, in the reviving of an- 
cient industries and the application of modern methods to those 
arts which women were wont to follow. Technical instruction 
is furnished by the Congested Districts Board and by the De- 
partment of Agriculture and Technical Instruction, but the live, 
vital, fighting force, consists of the women of Ireland tliem- 
selves. who are organized under the name of The United Irish 
Women, to prosecute a pi*ogressive campaign of propaganda. 



CHARLES W. HOLMAN 307' 

This society sends oi-ganizers into the districts to do work that 
is complementary to the work among the men which is done by 
the organizers of the Irish Agricultural Organization Society — 
that splendid dynamic of the cooperative movement. 

The third force to fight the Past, has to do with the enlarge- 
ment of the ideals of Irish life, with the renewing of the foun- 
tains of inspiration, with the reviving of Irish customs and the 
Irish culture. In fact, it is this force that represents in a large 
measure the spiritual ideals implied in the other 2 movements. 
This work is carried on under the leadership and direction of 
the Irish Gaelic League, though associated with it are other 
movements, such as. the national drama movement. 

The forces of the Past so reluctant to loose their grip over 
Ireland, may be characterized as ignorance, dogma and graft. 
Ignorance leaves the people untrained to find a place for them- 
selves in the economic world. In fact, few of the immigrants 
of Irish birth who come to America, have any qualifications for 
life beyond their individual intelligence, and their quick intui- 
tion. Dogma is personified by the power the religious ma- 
chines have over the lives of the people. Graft has its outward 
front and shameless face in the political machine which, orig- 
inally built up on the basis of the land struggle, today is in the 
hands of what in 'the main is an avai-icious leadership. It is 
controlled by the middle men and the liquor sellers. It seizes 
every opportunity to strengthen itself at the expense of Irish 
political institutions and the cost of the British Crown. 

The interlocking of these 3 forces opposing progress is so in- 
tricate that it is difficult for one not Irish born to determine 
their beginnings, or to follow their windings through the mazes 
of Irish life. Their strength is great and they must be con- 
sidered, although they are retreating as the dawn breaks on Erin. 

How the Irish Land Policy Was Bom 

I would call your attention to the remarks of a few moments 
ago, where reference was made to the prostration of Ireland that 
followed the potato famine of 1845-49. In the period between the 
famine and the establishment of the Irish Land Court in 1881, a 
series of peculiar cropping years occurred. One or two good 
years would be followed by a crop disaster. One or two bad 
years would be followed by a good crop. 

Now in those days, the written contract was almost unknown.. 
The standards of living of the landlord class were rising and 



;^08 MAKKKTING ANP FARM CUKPITS 

their costs givw highor as tho staiulanis ivso. ^-i tho hoavy hand 
4:^t* tho rent ehargtn* was tVlt in the laiul. Tho ivnts woro raisod 
in tho goixi yoare, and in tho bad oivp yoai*s. tho tonants oould 
not paA" their rents, nor wonUi tho siioooodinjj: ijv^od years enaWe 
them to eatoh up. So it oamo alxnit that within a To or '20 year 
perioii. many tenants in tho riohov lauds wore so in arivai's that 
they eonld not pt^ssihly nnvt their debts to their landUvrds woro 
they to live a ireneration beyond their natural span of lite. 

Sneh a wndition of "raek-ront" was hard onongh to boar in 
tho Sonth and tho North, bnt in the West of Ireland, tho pliijht 
of tho tenants was pitiable indetHl. Tho ivaotion hnnight about 
ilestruetion of pi\^perty. neighborhiXHl rovolntions. and. in nnmy 
eases. ass*assinatious of tho landlords. It is not snrprisiuir that 
seoret bauds should liave boon formed for tho frtving of Ireland 
from the tyrant England, when England was symboliz^Hi by the 
looal landlord. Tho young patriots of that day soenred their 
training in tho "' hedge schools " taught by expunged priests, and 
it n\ay be surmistnl that here eonld be found brewing that great 
alliance which cemente<.l the Catholic chnrch to the Nationalist 
party and toived the issue into Parliament for land ivform. 

P'ighting with every implement at hand, these ardent parlia- 
mentarians tiually drove a broad axe into tho English conscious- 
ness which resulted in tho beginnings of ival legislation. Glad- 
stone at last gnispod tho principle that conciliation and rostitn- 
tntion alone c\>uld win Ireland for the British Kn\piiY. With 
that broad concept, and with his far vision, ho championed the 
first givat land reform law. introducing with it a principle of 
legislation that must sivm arbitrary and socialistic to tho Amer- 
ican who lias boon roared in tho shadow of our federal (.\>nstitu- 
tion. l.ator statesmen were to elaborate those laud laws until tho 
British lai\d policy for hvland has dovolopod into o bivad linos 
of effort. These linos concern thoiusolvos with: 
(1^ Caring for tho self-sustaining toi\ant ; 
(2) Caring for the nuoconomic tenant : and 
io"* Caring for tho agricultural laborer. 

At this point, we should ivmeniber that the term "self-sus- 
taining" or "000000110" farmer, as interpreted by English 
<\'Ouomists. is a man who lives on a farm of sut^icient size and 
fertility to support his family in comfort. An "economic" 
farm has been defined a little closer to include tho farnt that 
will actuallv irive a living to a small family. 



CHARLES W. HOLM AN 309 



Caring for the Economic Tenant 

Willi (*liamct(!riNti(; liritisli policy, OladstoiK! w\t to work on 
l>l;iiis lo S('i1,l(! tlu! i(iiiii(Kiiat(! str-iiggle between landlords and ten- 
ants. Tlial, strufii'^ic! for yvnvH had (-onetMitratcd around the three 
tilings which are I'anious in Irish life, in Irish land struggle. 
They were : 

1. 'V\w, (l(!sir(^ of the tenant for fixity of tiunire. TT(; wanted 
lo know that lu; <H)nld not he; throwr) off his land, provided he 
paid his rent. 

2. The d(!sir(i of the tenant for th(^ ri^lit of fre<! sale. There 
had grown up in Iriiland the fcu^ling among the tenants that 
they possessed an own(!rship of the improvements and an own- 
ershij) in th(^ added fertility to the soil as a result of their occu- 
[)ancy. Tiuiants, therefoi'c, desircul the right to sell their part 
of this title to tlu^ land, without regard to the wishes of th(i land- 
lord. In this connection, it should he renuirked that in nearly 
every instance the Irish tenants were compelled to put the im- 
pi'OveuKuits u[)on the land and siu'h improvements represented 
practically no capital outlay by the owners. 

3. The desire oi* the tenant for the right of paying a fair rent 
for the land he was farTuing. 

To bring about amity on these points, Gladstone secured the 
passage by Parliament of the act of 1881, 

But another reason lay behind the passages of this act. It 
had l)e(!otrie almost impossibh; for the tenant to go into the ordi- 
nary courts of Ireland and secure justice when arrayed against 
the landlord. Indeed thi^ courts of Ireland at that time, with 
i'(igard to tlu^ land (|U(!stion, like th<; American courts in the 
cases of Capital vs. The People, had become an umpire; between 
the strong and the weak, with the decision usually going to the 
strong and against the weak. 

Ft therefore became necessary to introduce into the trials of 
land-rent cases, a third element, — the power of the court to in- 
vestigate, independently of either of the contesting parties, the 
mei-its, of a land-rent case, and to decide, as the r(;sult of this in- 
vestigation, modified by the court's opinion of the evidence; of 
the defendant and the plaintiff. The trial of such cases was 
also taken out of the hands of the civil courts and vested in a 
special land court. 

It may be that this Gladstone idea has had something to do 
with the desire for commissions which America is trying to es- 



310 MARKETING AND FARM CREDITS 

tablish at the present time, when so many of our courts have 
broken down, making it necessary for the creation of admin- 
istrative bodies with judicial functions. At any rate, this eco- 
nomic court consisted of legal commissioners and of lay com- 
missioners. It went about from place to place and held hearings. 
The landlords came out and gave their evidence. The tenants 
came out and gave theirs. Then the court went away to hold a 
hearing at another place, but while the court was sitting at some 
other point, investigators followed in its wake and checked 
aipcxn the evidence submitted by contesting parties. At a later 
time, the court would return to the place where hearings had 
been held and w^ould render decisions. These decisions would 
then be binding upon landlords and tenants as the terms of their 
contract for a period of 15 years. 

Why the Land Courts Reduced the Rent 

Now the effect of the first decisions in this land court was a 
sweeping reduction of the average rents in Ireland of about 28 
per cent. Why did the courts reduce the rents? It is evident 
that when a court enters into the consideration of an economic 
question, it must take into account factors other than may come 
within the province of the courts of law. In the old way, the 
court of law acted upon the assumption of theoreticians of the 
past, to the effect that competition in rent is the natural basis 
for fixing a price. In other words, that the theory of supply 
and demand ought to work to the satisfaction of both parties. 

But the Gladstone courts worked upon broader principles; 
went down to bedrock conditions and inquired into the standard 
of living of a tenant family and into the earning powers of the 
soil which the tenant family was working. Thei^" decisions were 
hosed upon the desire to improve the general social conditions, 
rather than the staying of the unrest. The significance of that 
nnethod cannot he over &mphasized, for it amounted to a declara- 
tion of rights for the common people and it challenged the ethics 
■&f the legal theory of supply and detnand. 

Reactions From tihe Rent Reductions 

As soon as it became apparent that the New Justice was in the 
land, and as soon as the landlords saw that the rents would un- 
doubtedly be reduced still farther, these landlords, many of 
whom were living in England and whose scheme of life had been 



CHARLES W. HOLMAN 311 

for generations based upon assured incomes from rents, seeing 
their incomes shrinking, began to prepare themselves for their 
doom. They said to themselves, ' ' We must get rid of the land ; ' ' 
for the land now represented a capitalization that was rapidly 
shrinking. But when they came to sell their land, they were in 
a quandary ; for there was none to buy except the tenants. In- 
deed, it would have been dangerous for any except the tenants 
to have attempted to buy. 

Now the tenants had no savings wherewith to purchase land, 
nor could they be expected to make payments any greater than 
their former rents had been. With this realization coming upon 
them, the landlords did a strange thing. For that matter, the ten- 
ants did a strange thing. Foi- the first time in the history of Irer 
land, the landlords and Sthe tenants foimd a point in comimon, — 
a point of joint effort and of agreement* As the landlords 
wanted to get rid of the land, and the tenants wanted to get rid 
of the landlords, the factions joined hands and worked through 
Parliament the bills which were later to develop into the great 
purchase policy whereby the British crown became the agent to 
float and administer the hugest real estate transaction in the 
history of all the world. By virtue of these bills, the powers of 
the land commission which had been created by the act of 1881, 
were extended to permit that body to purchase land when own- 
ers voluntarily agreed to sell. The commission then resells that 
land to the tenant population. This work is under the direction 
of a branch body known as the Estates Commissioners. 

How the Land Commission Does Its Work 

To carry out the transfer of so much land is a complex task 
and it requires a great staff of experts to do the work of the 
commission. The corps numbers at times as high as 600 em- 
ployes, and it requires several buildings off Merrion Square in 
Dublin to house the clerical force. The men employed embrace 
a variety of activities and handle every conceivable problem 
that could come up in the tedious process of winding up an 
estate. 

How such an estate is handled is a very interesting study, 
and can only be gotten by a visit to the commission itself, where 
one will find two-thirds of the farms of Ireland are already 

* The first public expression of this union of forces found itself in the 
Land Conference of 1902, called by Captain iShawe-Taylor, which met 
in the Mansion house at Dublin and formulated the principal provi- 
sions of the Wyndham Act of 1903. 



312 MARKETING AND FARM CREDITS 

mapped, with all kinds of notes as to the history of the prop- 
erties. But, we will say, for example, that Lord B and 40 ten- 
ants have reached an agreement whereby the tenants will pur- 
chase the farms, if the government will back the transaction. 
Lord B, who would like to get his money "right now'' lodges 
with the commission what is called an ''originating applica- 
tion." 

With this application are maps, a description of the neces- 
sary schedules of tenure, the titles and agreements, and the 
names of the tenants who will do this purchasing. From this 
time on the collection of the rents is placed in the hands of the 
land commission. This collection is on the basis of the pro- 
posed annuity of Sy^ per cent which in a 69 year period com- 
pletely absolves the tenant from any obligation. Different acts 
prescribe other ways, but, this has been the prevailing method. 

The originating agreement is lodged with the vesting depart- 
ment of the commission to be checked. The purchase agree- 
ments are lodged with the purchase and sales departments to 
be registered. They are then transferred to the collection 
branch to be dealt with. 

Disposing of Title Problems 

The maps and agreements are sent to a surveyor, who makes 
a visit to the estate and carefully checks the boundaries, looks 
up the occupants, etc. His notes are then returned to the 
mapping department for a revised map. The documents are 
then sent to the inspection department of the valuation depart- 
ment which sends an inspector down to make a general report 
on the estate and on the security for advances applied for. 
Among the points considered here are turbary questions, sub- 
tenancies, embankments, ancient monuments, rights of way, 
fences and miscellaneous matters as affect tenants, etc. 

All title matters and legal matters are submitted to a special 
legal department composed of skilled counselors, who advise 
the commissioners in order to secure them against loss. The 
purchasing department then organizes the material and pre- 
pares it for submission to the commissioners. The commission- 
ers take the report and final recommendations of the depart- 
ment and submit it to a thorough catechism. This brings up 
queries for the vendor's solicitors to answer. 

After all matters are disposed of by rulings of the commis- 
sioners and all grievances discharged, the purchase is sanc- 
tioned by the Estates Commissioners. 



CHARLES W. HOLMAN 313 

The judicial commissioners now sit and, after examining the 
case, direct that the payment of the purchase money be made 
either to the owner or to the persons entitled to it. The vest- 
ing office draws a check and lodges the money in the bank of 
Ireland to the credit of the estate. The purchase agreement 
now becomes a vesting order. It goes back to the recorder, who 
notifies the registration office of the transfer ami makes a com- 
plete destription. (The registration or title office has a func- 
tion to register all the land in Ireland that has been sold under 
the various land acts.) 

Creditors and claimants against the estate are disposed of 
and whatever remains goes to the owner in accordance with 
the English law determining transferance and inheritance of 
property. 

In many ways the land commission has departed from hide 
bound rules and methods in handling so difficult a question as 
the re-organization of one of these estates. Each question is 
judged on its own merits, and the commissioners do not hesitate 
to depart from the established precedents when justice de- 
mands such a course. 

Of course many difficulties have presented themselves, and 
not the least troublesome has been the point as to who might 
be entitled to land. As there is not enough land to go around, 
some method had to be devised as to preference. I will not 
attempt to name the order of preference, but, first of all, the 
tenant on a farm was considered to have the first right to it. 
The near of kin, evicted tenants, and sons of evicted tenants 
came in for their rehabilitation. Nothing is more indicative of 
the Irish temperament than the stories of individuals who have 
laid claim to land because their fathers had been evicted. In 
many cases, Irishmen living in America or the colonies, have 
returned to assert their rights to the plots of land from which 
their fathers had been turned away by rent collectors of old 
time. 

Settling a Tender Question 

How anxious was the government to bring about an amicable 
settlement of the land question and also care for the welfare 
of all persons concerned, may be seen by the landlord's bonus 
provision in the Wyndham Act of 1903. This act was passed 
with a view to encouraging the voluntary sale of all the large 
estates to the land commission, so that they could be resold to 
the tenants. Under the terms of the act the commissioners were 



314 MARKETING AND FARM CREDITS 

required to make advances to tenants in all classes where a 69- 
year purchase would bring the annuities to between 10 per cent 
and 40 per cent under the former annual rents. Should the ten- 
ant be operating on the "first term" decision of the land courts, 
the reduction cannot be less than 20 per cent nor more than 40 
per cent. Should he be farming under a second term decision, 
the reduction must be between 10 and 30 per cent. But what 
about the landlord? In order to reimburse him against too dis- 
advantageous a bargain, the estates commissioners were em- 
powered to pay as high as a 12 per cent bonus for the land, 
above what they sold it to the tenants on the annuity plan. It 
was another manifestation of the British principle of settling 
difficult points as they arise, and settling them in a way to sat- 
isfy all parties. While the tax payers had to stand that loss, 
they government authorities felt it to be a wise provision in view 
of the social benefits that would accrue to the island. 

On the whole, the land purchase idea worked a great gain 
to the former tenants, as the average reduction which the an- 
nuities effected, based on 3^^ per cent interest, was from 15 to 
40 per cent under the former annual private rents. In many 
■cases this difference amounts to an annual saving that is banked 
or used to restock the farms with equipment or with beasts. 

Helping Fanners in the Congested Districts 

For the economic tenants of the richer" portions of Erin the 
principle of voluntary sale of land by landlords was deemed 
sufficient. It was adequate "because the lowering of the an- 
nuities quickly affected the rent price of land unsold, and rents 
came tumbling down over the whole island. But for the west- 
ern parts of the country, where the population was over- 
crowded, an entirely different set of conditions existed and a fur- 
ther advance in the principles of social legislation was necessary. 
That advance was the assertion of the right of the state to ac- 
quire land compulsorily from the landlords and do what might 
be deemed necessary to secure the individual happiness and free- 
dom of the people. 

The condition of the West is such that often, even now, on 
one of those old estates a single tenant might have 25 or 30 
little holdings, scattered over a mile radius, but not totaling 
over 5 acres. In the past the most marvelous splitting, scat- 
tering and mixing of tenant holdings prevailed. It was a sur- 
vival of the old Rundale system of tenancy, mongrelized by 
bailiff graft. 



CHARLES W. HOLMAN 315 

It was recognized that a readjustment of this population 
would be sure to result in an improvement of the conditions of 
life. But readjustment in a purely Celtic community is a 
process not so easy as the uninitiated might suppose. On ac- 
count of Irish sentiments and Irish prejudices, the shifting of 
families would be next to impossible unless the state had the 
power to force the landlord to sell, and to move the population 
anywhere it pleased. 

To carry out that great social scheme, Parliament created a 
separate body known as the Congested Districts Board. It 
vested in the board an unusual power ; but the board is careful 
not to exercise it, except in cases where there is the greatest 
need. The officials appointed are selected for their tact and 
for their sympathy with the people and the situation. This 
board has not only the power to force the compulsory sale of 
the land and to redistribute the population, but it has the fur- 
ther power to reclaim waste land, to improve the agricultural 
land, to resurvey and re-allot holdings; to built schools and 
houses for the people, to lend money individually or to groups 
of farmers for productive purposes, to train the people in the 
industrial arts and to revive the historic occupations of the 
eountr^y. 

Under the able administration of Sir William Doran, the 
board is carrying out a gigantic rebuilding of a large area. For 
a number of years, the money spent in the doing of this work 
has in itself afforded an occupation to a large number of peas- 
ants. The board has changed the face of the country with re- 
surveys but it has encountered much opposition, particularly 
with regard to its power to force the sale of land. Yet the 
highest court in England has recently sustained the compulsory 
power of the board by its decision adversely to Lord Clan- 
rickarde, who was the last of the big landlords to fight the 
government in its attempt at restitution. This case had been 
pending for many years. The decision of the House of Lords 
is a historic one, insomuch as it is the final word upon the 
power of the state to appropriate private property for a social 
purpose. 

Transforming an Estate in the Congested Districts 

The board condemns estates one at a time. Public valuers 
arrive at a decision as to the amount to be paid the landlord. 
The tenants on the estate, during the process of its re-organiza- 
tion, become tenants of the board. The first operation is to 



316 MARKETING AND FARM. CREDITS 

inspect the estate. The second is to resurvey, with a view to 
ascertaining how many holdings of decent size can be allowed. 
On all of these large estates there are tracts of waste land 
and tillable, but uncultivated land. The board surveyors lay 
out the estate, providing for adequate drainage and for the 
necessary roads. They make it a policy to employ from the 
estate all of the unskilled labor that can be utilized. During 
the course of this employment, the representatives of the board 
become as friendly with the tenants as is possible. The board 
usually picks some of this unused land and builds a few houses 
that will last a hundred years. With much tact and with a 
fine use of the principle of indirect action, the board persuades 
some of the tenants to leave their holdings and take up resi- 
dence upon the new plots. As soon as one family gets started, 
it becomes easier to move the next family, so that in the course 
of from 5 to 15 years, a readjustment has taken place somewhat 
approaching the ideal of the first survey. 

A Little Tact and a Lot of Commonsense 

But the board often encounters obstacles and obstinates. 
There is frequently a great protest over the character of the 
new houses. In several instances that I ran across, the ten- 
ants who had been accustomed to live on dirt floors with the 
floor at least a foot below the entrance to the dwelling, pro- 
tested mightily because the board had built a substantial floor 
a foot above the surface of the earth. In such cases, it is not un- 
heard of for the family to begin shoveling up the earth around 
the cottage until they do away with the little step that leads up. 

Both the board and the Estate 's Commissioners find that the 
settlement of turbary rights, (the rights to cut the turf,) is a 
matter that requires much tact and no little time. At first the 
board turned over these matters to the tenants to settle for them- 
selves, but it soon became clear that they would never agree, 
as each thought the other fellow might get a bigger selection 
of bog than himself. So the board now handles these matters. 

The board has also "striped" the mountains, and each family 
knows what part of the mountain goes with its agricultural 
holding. 

This work has been going on for two decades or more, and 
it will probably require another two, before the board com- 
pletes its task of allocating the families. 



CHARLES W. HOLMAN 317 

It has been urged against this work that it develops too great 
a feeling of dependence of the people upon the government. I 
have no doubt that this is true to some extent ; but the work of 
the board is based upon the idea of aiding the people to the 
point where they will become self-supporting and in no sense 
can its activities be interpreted as charitable. It is really 
state aid to a submerged population, and that state aid auto- 
matically stops as the population rises above the poverty line. 

Results of the Irish Land Policy 

What are the benefits that have accrued to the people from 
state-aid? Was it worth while for the government to put its 
credit behind this mammoth real estate deal — the biggest in 
the world? 

The transaction already represents the transfer of a billion 
dollars worth of property. Viewed in terms of statistics, who 
benefited? 

In 1876, over half of the land of Ireland was owned by about 
700 men. in 1906, there were 172,548 owners and 422,796 ten- 
ants. In 1913, there were 401,819 owners and 216,255 tenants. 
In 1915, over 450,000 farmers owned their homes and that rep- 
resents two-thirds of all of the land in Ireland. 

Among the benefits that have come from state aid to land 
settlement are these : 

1. The industry of occupiers of the land has increased. 

2. Farm houses and farm outbuildings have improved. 

3. The tendency to sell interests in land has decreased. 

4.. The tendency to sublet and divide holdings has become 
almost dormant. 

5. The solvency of the occupiers has improved. They are 
now more cautious. Many in County Mayo pay cash for fer- 
tilizers and the ' ' gombeen ' ' man has tended to disappear. The 
gombeen is the little sharper. He is sometimes a trader and 
sometimes a private money lender. The "gombeen" man is so 
known from "gom", a fly, and "een", little. His type is de- 
creasing in almost every section of the country. 

6. The care by the tenants of the soil is most noticeable. This 
is reported by almost every inspector. Almost every adminis- 
trative Avorker under any of the departments who has had any- 
thing to do with land purchases has noticed this. 

7. There is a tendency for better occupiers to go on the land. 
The insolvent tenants are eventually forced to sell their inter- 



318 MARKETING AND FARM CREDITS 

ests and to depart. Therefore, you will see that quite a survival 
of the fit is taking place there among the tenants. 

8. There is a feeling of contentment, an absence of fear, while 
there was a great deal of fear in the country districts before; 
a prevalence of law and order that did not exist under landlord 
and tenant relations! 

9. Livestock and working capital on farms have increased. 
In many cases this represents the difference between the fonner 
rent and the present annuity. 

10. Agitation has tended to die. 

Who has benefited most by this policy ? Commissioner Bailey, 
the directing genius of the land commissior;, said to me that it 
is the man who has purchased a holding of sufficient size to oc- 
cupy all of his time and energy with some aid from the family, 
but no more than this. 

The Big Thing Behind the Benefit 

Yet there is a greater benefit than what might accrue to any 
person or class. It is the social benefit that comes from peace 
and a prospect of amity in Irish-English relations. ' The true 
significance of this may be caught only by recalling that, to the 
Irish tenants, England has meant but two things — a power over 
them, wresting a profit from them. To the tenant, the police 
have symbolized the power and the absentee landlord the profit- 
taker. So deliverance to the Irish has come to mean ownership 
of their land and home rule so that they can select their own 
police. But the keenest desire has been for ownership of the 
land. Now, as England has changed her policy of suppression 
to one of restitution, and her policy of oppression to one of 
conciliation and assistance, a psychological change must take 
place in the Irish nature. As the landlord vanishes from Irish 
life, the desire of the peasant for home rule becomes modified to 
an impersonal ideal. " 'Tis a private quarrel anyway," thinks 
the Irishman, and when a crisis arises, he is found fighting side 
by side with his English brother. So to understand the loyalty 
of the Irish in the present war, we must go back to the Gladstone 
act of 1881. 

Criticisms of Land Purchase Administration 

Some criticisms might be made of land purchase administra- 
tion though I hesitate to suggest them, as a 4 months' study in 
the field does not fit one so well to criticize as it does to find the 



CHARLES W. HOLIMAN 31i> 

good points. But I will give you the benefit of the criticisms 
which were made to me by the people who make their home in 
Ireland and apparently understand the situation, and some of 
the criticisms made by persons connected with the administra- 
tion of the acts. 

It was said that some occupiers have been placed upon land 
which was not sufficient in size or fertility to support them, while 
other occupiers have had enough land but were not provided 
with sufficient working capital to get the best returns. In the 
congested districts the tendency was noticeable for the people to 
depend too much upon the government doing things for them. 

There are also some obstacles. The tenants think that tar 
rates are a little high. The term "tenant" here should be ex- 
plained because the tenant-purchasers consider themselves ten- 
ants of the farm until they get their land paid out. This land is 
paid out upon an amortization plan, based upon 3I/2 per cent 
interest, as a rule, which requires from 65 to 69 years to obtain 
free title. Of course the farmers also complain of the rise of 
wage labor prices. They claim that it has risen over 300 per 
cent in the last four decades while the quality of the agricul- 
tural laborer of Ireland is said by them to be very inferior ta 
what it was in the past. 

Caring for the Agricultural Laborer 

We have seen how the government has cared for 2 important 
classes of its farm population. These 2 classes have secured all 
the available land, but there remains a surplus rural popula- 
tion in Ireland for whom there are no farms. This surplus con- 
stitutes the agricultural laborers of whom there are over 200,000 
in that country. The policy of the government has therefore- 
shut off, for about 100 years, this class from becoming home own- 
ers. The rate of wages paid is so low that subsistence is the aim 
of that class. Between the employing families and those laborers 
there has arisen a kind of conflict by virtue of fact that, in the 
past, the farmers have housed and boarded, in the main, their 
help. The laborers have complained as to the character of the 
housing and of their insecure lot in life. 

In order to care for this class and put them in a position 
whereby they can bargain with the farmer on terms more re- 
sembling economic equality, an entirely different set of social leg- 
islation became necessary. It was conceived that if laborers^ 
cottages were built at convenient points and if to each of these 



320 MARKETING AND FARM CREDITS 

cottages were attached a little plot of land for garden purposes, 
it would put the laborer in a position much better than he pos- 
sibly could be, under the old system of hiring out. Accordingly, 
Parliament has vested in the county councils the power to con- 
demn land for allotment garden purposes and to erect upon this 
condemned land substantial cottages. 

This work is now taking place throughout the country and the 
traveller is greeted by the pleasant sight of building activities 
which often means that the laborer will live in better quarters 
than his tenant employer. These houses are rented - by the 
county councils or by the urban and district councils as their 
agents, to the laborers at a cost which barely pays the interest 
and sometimes only pays for the upkeep of the places. 

Whether this policy will stem the industrial unrest of this class 
is doubtful. Already there are signs of organization. The In- 
dustrial Workers of the World have been busy among them and 
the government may soon have to cope with further problems. 

I would not claim that the British policy has been perfect 
'either in its principle or its administration. There are still 
many unsolved questions. There will yet remain the question 
of the tendency to subdivide holdings when tenants have paid 
out their land. There will be continuous problems that arise 
from surplus population. But in a social sense, there are many 
good general results to be seen from this policy, chief among 
which is that it has made possible a self-help movement of an 
unpartisan character, that is flowering into a real Irish Renais- 
sance. 

Will Land Purchase Work in America 

If I should be asked whether the policy described would 
work in America, I should answer that there are sections Avhere 
no other policy except state aid could meet our problems. I 
believe that if this policy were thoroughly understood, it would 
find practically no objections by interests that are now lending 
money to farmers, by the owners of the land, or by the town 
population. It would certainly be a boon to the tenant who 
can only hope to pay out a farm by his annual rent. We should 
remember that the Irish system is based upon the idea of the 
rent payments being amortized through a long period to pay 
out the farm. 

Now America has tenant farmers for whom if such a pro- 
gram is not prepared, there are but 2 courses open; either they 



CHARLES W. HOLMAN 321 

must continue to rent the balance of their lives on a status 
similar to the wage laborer, — or they must give up tenant farm- 
ing and go into other occupations. 

''"let us remember that land purchase policies are not actu- 
ated by the desire of inflating land values or of permitting 
private individuals to profit, but they spring from the concep- 
tion that the normal adjustment of the population to the soil 
is the fundamental basis of social well-being. In this country, 
there is enough land unused to place every competent, land- 
less man upon a farm. Yet there is no more free land, nor 
have our states or national government appeared able to grasp 
the significance of the trend of ownership in this country of 
ours. 

American Land Question a Grave Concern 

How keen is the need of America to fix upon some broad 
governmental land policy may be instanced by calling your 
attention to a few of the perplexing questions which beset us 
as a nation. The drift toward a concentration of land owner- 
ship is alarming; already one-fifth of the total area of the 
United States is owned by less than 2,000 persons. The hold- 
ing of lands for speculative purposes has become an evil of 
menacing proportions. "We have also a rapidly growing tenant 
farmer class; every third farmer in America works another 
man's land, while in the 26 states that produce the greater por- 
tion of our grain, dairy, perishable products, and all of our 
cotton, a condition of land tenure has come about that im- 
perils the commonwealth. 

Nor should we be too optimistic as to the less populated, de- 
veloping sections of the country. In the Southwest, in spite 
of the greatest forced development of land sales to homeseek- 
ers, there are 2 tenant farmers who spring into existence for 
every 1 farmer who is able to purchase a home. When this 
condition is viewed in its relation to the speculative spirit, and 
when it is seen that in the richer farming communities, as in 
Illinois or the blacklands of Texas, the price of land has been 
arbitrarily raised so high that in most instances the profits of 
the farm will not pay out for the would-be purchaser, this ques- 
tion divides itself into 2 distinct programs with which our 
people must concern ourselves. 

On the one hand, the tenant farmer of the richer sections 
must settle on the newer and less expensive lands. On the 

21— M. F. c. 



322 MARKETING AND FARM CREDITS 

other, some sound policy of effecting a sale of the lands by the 
landlords and of turning these tenants into home owners, must 
be created. 

The condition becomes more grave when we reflect that the 
settlement policies of the national government and the states, 
as administered, have not been successful in creating farmers, 
but have been most successful in encouraging farm speculators. 
Also in the irrigated sections where government development 
has cost huge sums of money, it is now apparent that the gov- 
ernmental policy of turning people loose without further as- 
sistance than the placing of them upon an equipped farm or 
upon a farm equipped with water, is always inadequate and 
sometimes cruel. 

Without seeking to burden you by further portrayal of dis- 
tressing conditions, I am constrained to present to you one or 
two different aspects of the problem. There are sections, — • 
rich farming sections too, — where the farm population has 
reached its maximum and has begun to shrink. Here tenancy 
is growing rapidly indeed. There are farming sections that 
face a problem of a depleted and devitalized life. There is 
also growing up among us an oligarchy of the small towns who 
control the farm communities, both by virtue of land ownership 
and by the possession of a monopoly upon the credit facilities 
open to farmers. At the same time we must consider, when 
we view the landlord and tenant relationship, that in certain 
of the cotton states, the tenant has been removed from the his- 
toric position of being a tenant of the soil, to the the indefinable 
status of a "cropper" which, in reality, gives him about the 
same rights as a day laborer might possess. 

Immigrant Complicates Agricultural Problems 

Now there are other complicating features to the agricul- 
tural problem which necessitate our fixing upon a land policy. 
On the Atlantic seaboard, on the Pacific coast and along the 
Mexican border, the farmers find themselves face to face with 
a new condition. In the New England states, there has ap- 
peared an immigrant negro competitor of the Southern Euro- 
peans, who themselves are silently taking the place of the 
old New England stock. On the Pacific coast, the Jap, the 
Chinese and the Hindoo are assuming competitive relations 
with the native American farmers for the rent of the land. In 
the old Southern States, we have the inter-racial competition 



CHARLES W. HOLMAN 323 

of negro and white man, and in the Southwestern 'States, a third 
element in the Mexicans, who, silently invading this country, 
are dispossessing both negro and native white farmers of the 
lands which they formerly rented. 

Such, briefly, are some of the manifestations of change in 
agricultural America. Such conditions open the great ques- 
tion: what shall this government do toward moving the im- 
migrants of other nations to the farms ? What machinery shall 
be created and how shall this machinery be operated? 

Basis for American Land Policy 

There can be no argument against the fixing of a policy. In- 
my own opinion, it must be based upon these assumptions : 

1. That the free land is about gone. 

2. That the shifting about of the peoples within our borders 
must inevitably grow less with the vanishing of the land. 

3. That the farms of America should be owned by no one ex- 
cept those who farm them. 

4. That land settlement involves too many issues of vital con- 
sequence to be conducted by private profit-seeking agencies. 

5. That federal and state aid is the normal way of bring- 
ing about the needed readjustment of population to the land 
and the settlement of the land where there is no population. 

6. That the responsibility of the state does not end with the 
placing of the tenant purchaser upon the land, even though the 
terms of the contract are for long-time purchase. I can con- 
ceive of no greater injustice to the tenant than for the govern- 
ment to adopt such a policy. A socially just method of adminis- 
tration will carry out a plan of assistance and instruction of the 
land purchaser in crop production, and possibly in the business 
side of marketing his crops and in the financing of his operations. 
This latter phase of advice may be in some sections better dele- 
gated to an extra-governmental agency, as it is done in Ireland, 
where the I. A. 0. S. acts as the organization to instruct, advise 
and inspect farmers' cooperative societies. 

7. That a sound and sane basis of valuation of land should ac- 
company any scheme of state-aided land purchase, in order to 
prevent speculative attempts. Indeed this is at the very root 
of the evil in America, and should be undertaken, even though 
there were no demand for state aid. But with state aid, it be- 
comes imperative, else the owners of land would seek to ''water" 
their valuations in order to offset the proposed reductions in in- 



324 MARKETING AND FARM CREDITS 

terest. Such valuation power should be vested in public val- 
uers, whose control should be exercised by governmental agencies 
not subject to local influence. The new-country custom of in- 
discriminate trading on rising land markets must be checked in 
order to bring the land back to its rightful use as a producer of 
wealth. Now, it is depressed or inflated in value by methods 
not less doubtful than the bucket-shop tactics of a few years ago. 
It is entirely likely that this needed reform may, after a care- 
ful investigation has been made, call for the doing away with 
the taxation of capital-valuation of land, and the substitution 
for it of income-valuation of land in the service of production, 
and of unearned increment taxation of land not in active use. 

Undoubtedly there are great lessons to be learned from the 
experiences of other governments; but I maintain that the ex- 
perience of Ireland has a direct application to the hope of 
America; because the Irish are so close in temperament to the 
prevailing American temperament, and the Irish plan has been 
worked out by a government whose ideals of personal liberty 
and social control are much the same as our own. 



NEEDED STATE LEGISLATION TO AID 
LAND PURCHASE 

Harris Weinstock 
Member California State Rural Credit Commission 

I have been asked to talk on the question of ''Needed State 
Legislation to Aid Land Purchase." This is a national Confer- 
ence, and I take it, proposes to deal with questions of national 
import, but being unfamiliar with the conditions that prevail 
throughout the Middle West, and more especially in the East, 
relative to land purchase, I cannot discuss the matter from as 
broad a point of view as may be desired. I must confine myself 
to dealing with the Pacific coast conditions, and more especially 
wiith the situation in California. 

Land Purchase Helped Ireland 

As is well-known, for many generations the peasantry of Ire- 
land was steeped in misery, wretchedness, poverty and degrada- 
tion, due to the prevailing system of large landed estates with 



HARRIS WBINSTOCK 325 

absentee landlords and farm tenants. These tenants had long 
since discovered that the greater their thrift and industry, the 
better their husbandry, the more they increased their own bur- 
dens, because the rental value of the land was dependent upon 
its productive value and the more that the tenant made the land 
produce the more he increased his own burdens in the way of in- 
creased rent. This killed within him his ambition, and made 
him shiftless and thriftless, with all their consequent ills. As 
pointed out by Harold Barbour : 

''The country has appealed to God, to the state, to humanity, 
for sympathy, for aid, for dollars, and had become a mendicant 
among the nations." 

And, as further pointed out by Myron Herrick, 

"Nearly one-half of the inhabitants of Ireland had emigrated 
beyond the seas and most of those who remained were living in 
mud huts, or squalid hovels, inflamed with mutinuous rage 
against the government. The blight of the farming classes was 
the most wretched of all, for on account of their crude method 
of cultivation and marketing, foreign competitors were under- 
selling them in the staple products for which the soil was best 
adapted and the meager gains was shared between the landlords 
and the 'Gombeen men.' " 

As you doubtless also know a decade or more ago there was 
enacted by the British Parliament what has since become known 
as the "Irish Land Bill," which created a Eoyal Commission, 
with power to appraise the large Irish landed estates with their 
absentee landlords, to buy these estates at the appraised value, 
plus 12 per cent bonus, to subdivide them, improve them, and 
sell them to the Irish peasants, the government advancing the 
peasants 100 per cent of the purchase price, allowing about 70 
years' time in which to make payments, on the amortization 
plan, with interest on the deferred payments at the rate of 3V2 
per cent a year, and in addition thereto, the government made 
personal loans to the tenants, on long time payments with low 
rates of interest, to enable them to purchase stock and imple- 
ments, and furthermore provided them with farm advisers, in 
order that they might be able to convert their pasture land into 
tillage. During the intervening decade, and directly as the re-, 
suit of this remarkable paternalistic legislation on the part of 
the British Parliament, a revolution and an evolution has taken 
place. Over 300,000 wretched, poverty-stricken, discontented 
farm tenants have been converted into over 300,000 landed 



326 MARKETING AND FARM CREDITS 

proprietors, filled with, ambition and hope and thrift and in- 
dustry. Jails, that in the past have, been filled to overflow- 
ing with agrarian criminals have, as I have seen with my 
own eyes, been converted into school-houses, — intemperance has 
largely disappeared among the Irish peasantry, and peace, pros- 
perity and contentment prevails among them. What had been 
to Great Britain a serious and perplexing and menacing liability 
in the form of hundreds of thousands of discontented and em- 
bittered farm tenants have become converted into loyal and 
prosperous subjects. Ireland, from being the most poverty 
stricken and distressed land is today the most prosperous little 
country in alL Europe. The Irish tenant, per capita, is rapidly 
growing to be the richest tiller of the soil in Europe. Ireland, 
with its milk products, is rapidly driving out of the British 
market the thrifty, industrious Scandinavian milk producer. 

To those who say that legislation can be of little help to the 
tiller of soil and that governmental paternalism should be 
frowned down, because it tends to destroy individualism and 
personal initiatives, no more complete answer to their untenable 
criticisms can be offered than the object lesson which Ireland 
today presents to the world. 

Two Kinds of Paternalism 

It must be remembered that there are 2 kinds of paternal- 
ism, — a paternalism that helps and a paternalism that hurts. 
Any kind of paternalism that gives something for nothing and 
makes of the recipient a dependent is hurtful paternalism be- 
cause it tends to destroy individual effort, but the paternalism 
that brings out the best in the individual, that arouses within 
him ambition and fills him with hope, and that by extending a 
helping hand enables the recipient to stand firm upon, his own 
2 feet, is a paternalism that should be aided and supported 
and encouraged. 

England, in all its history, has never enacted a piece of legisla- 
tion that has proven so helpful to the individual, so beneficent 
to the land, and so good an investment to the government as has 
the Irish Land BiU. In no other way could Great Britain have 
loaned its credit, as it has done in the case of Ireland, and re- 
ceived a greater compounded interest in the way of advancing 
the welfare of its people, adding to the strength and wealth of 
the nation and increasing the loyalty of its subjects as it has been 
able to do in the case of Ireland. Nor has this been in the nature 



HARRIS WEINSTOCK 327 

of an act of charity upon the part of Great Britain towards its 
Irish peasantry, because the Irish peasant is expected to pay back 
at the rate of 100 cents on the dollar for everything that he has 
received. He must, in due course, return to Great Britain the 
money advanced in his interest, he must meanwhile pay the in- 
terest on the loan, and also the principal and interest advanced 
him as a personal loan, but he is permitted to do this on terms 
and conditions, that are no burden on G-reat Britain, and that 
make it possible and that bring out in his endeavor to return the 
advances made him the very best out of the stuff that God has 
put in him. 

Fortunately, the people of this country are not in the terrible 
condition in which were the people of Ireland, and yet, unless 
some radical legislation is enacted, our American farm tenants, — 
many of them — are rapidly drifting into that same condition. 

What the U. S. Commission on Industrial Relations Discovered 

Let me further emphasize what I have already said relative to 
the increase in farm tenancy by quoting from the contents of 
the report issued under the title ' ' Final Report of the Commis- 
sion on Industrial Relations for 1915." 

' ' Tenancy in the Southwestern States is already the prevailing 
method of cultivation that is increasing at a very rapid rate. In 
1880 Texas had 65,468 tenant famiKes, comprising 37.6 per cent 
of all the farms in the state. In 1910, tenant farmers had in- 
creased to 219,571, and operated 53 per cent of all farms in the 
state. Reckoning on the same ratio of increase that was main- 
tained between 1900 and 1910 there should be in Texas in the 
present year, 1915, at least 236,000 tenant farmers. 

"For Oklahoma we have not adequate census figures so far 
back, but at the present time the percentage of farm tenancy in 
the state is 54.8 and for the 47 counties where the tenancy is high- 
est the percentage of tenancy is 68.13. 

"Tenancy, while inferior in every way to farm ownership 
from the social standpoint, is not necessarily an evil if conducted 
under a system which protects the tenants and assures cultiva- 
tion of the soil under proper and economic methods, but when 
tenancy exists under such conditions as are prevalent in the 
Southwest, its increase can be regarded only as a menace to the 
nation. 



328 MARKETING AND FARM CREDITS 

' ■ The tenants having no interest in the results beyond the crops 
of the single year, the soil is being rapidly exhausted, and the 
conditions therefore tend to become steadily worse. Even at 
present a very large proportion of the tenants' families are in- 
sufficiently clothed, badly housed and underfed. Practically all 
of the white tenants are native-born. As a result of these con- 
ditions, however, they are deteriorating rapidly, each generation 
being less efficient and more hopeless than the one preceding. 

"The average interest paid on all farm loans is 10 per cent 
while small tenants in Texas pay 15 per cent or more. The 
average rate of interest on store credit is conseryatively put at 
20 per cent and in many cases ranges as high as 60 per cent. 

"As a result both of the evils inherent in the tenant system 
and of the occasional oppression of landlords a state of acute un- 
rest is developing among the tenants and there are clear indica- 
tions of the beginning of organized resistance which may result 
in civil disturbances of a serious character. ' ' 

As the result of all the study and investigation and thought 
that I have been able to give to this problem of farm tenancy and 
absentee landlordism that has worked such havoc in other coun- 
tries and that is working such havoc in various parts of our own 
country, the conclusion has been_ forced upon me that there is 
only one agency that can bring about a remedy and that is the 
government itself, — either the state governments working within 
their own territories or the federal government, or both. Nor 
need the state or federal governments of this country do any 
pioneering work in solving the problems. The pioneering has 
already been done by Great Britiiin in the case of Ireland, by 
Germany in South Africa, and by Australia and New Zealand. 
We need simply profit by their experience and adopt their tried, 
tested and successful methods, adapting them to our American 
needs. Perhaps the best model for us to follow in making it pos- 
sible, more especially for the farm laborer and the farm tenant 
to become converted into a landed proprietor is that of New Zea- 
land. As pointed out by Myron Herriek: 

New Zealand Finds a Way Out 

"New Zealand has a governmental department supplied with 
a capital fund of 30 million dollars by the issue and sale of gov- 
ernment bonds drawing not to exceed -1 per cent interest. 
Sums not in excess of 71^ million dollars in any one fiscal year 
may be raised in this way for the operation of the office. The 



HARRIS WEINSTQCK 329 

bonds are redeemed from a sinking fund created by contributions 
of one per cent of the principal of loans made from the proceeds 
of the bonds. 

"Loans to settlers may be for 10 years or under at 5 per cent 
per annum or for 361^ years repayable by a semi-annual annuity 
of 3 per cent. First mortgages are always required for se- 
curity ; three-fifths of the value is the very largest amount which 
may be advanced on any property." 

In Australia the system provides for the state buying the land 
that has been officially tested as to its quality, improving and 
subdividing it and selling it to the homeseeker, on a basis of a 
first payment of 5 per cent on the value of the land and a further 
first payment of one-third of the amount of improvements in the 
way of buildings, barns, stock, etc., made thereon, the balance is 
payable on the amortization plan at the rate of say 4 per cent 
interest, one-half per cent for cost of state administration and 
1% per cent, annually on the principal, making an annual pa}''- 
ment in all equivalent to 6 per cent of the balance due for a 
period of 30 years, at the end of which time the debt has been 
wiped out. 

Progress in Australia 

Let me contrast the method of dealing with homeseekers, &ay 
in the state of California, with which conditions I am most fa- 
miliar, and the methods pursued in Australia, in order better to 
illustrate our unscientific American method with its disastrous 
results and the scientific methods pursued in the Antipodes and 
the successful results there obtained. The method of colonizing 
in California, in more recent times, has been for a group of capi- 
talists to come together, to subscribe to a fund, to buy a large 
body of raw land, to drain or to water it, as the case may be, to 
subdivide it and to sell it to homeseekers with say one-fifth down 
as a first payment, the balance payable in annual installments 
of 2, 3, 4 and 5 years, carrying from 6 to 8 per cent interest on 
the deferred payments. The theory of these capitalists has been 
that by such methods they could not only make a profit for them- 
selves, find homes for desirable homeseekers, but add also to the 
welfare of the state. Practically, these plans have worked out 
about as follows : A body of raw land would be bought, say at a 
maximum valuation of $50 an acre, the cost of draining or put- 
ting water on such land would add $50 more to the cost, making 
it worth say $100 an acre. The records show that to market such 



330 MARKETING AND FARM CREDITS 

land to homeseekers involves an expense of an average of 30 per 
cent on the selling price. The capitalists would justly feel 
themselves entitled, considering the risks involved and the labor 
and energy required, to a profit of about 20 per cent on the selling 
price. This would bring up the selling price to the homeseeker 
to a minimum of two hundred dollars an acre. Alluring and 
attractive literature would be prepared, setting forth the de- 
lightful climatic and wonderful conditions of California 
and the unusual soil possibilities of the commonwealth. Clever 
and attractive salesmen would be sent out, more especially to 
the Middlewest States, and untold numbers of desirable home- 
seekers, having at their command all the way from $1,500 to 
$5,000 would be induced to come to locate on these subdivisions. 
They were made to feel that if they had enough money to make a 
first payment on the land and the land itself would do the rest, 
so far as future payments were concerned. These homeseekerS; 
as a rule, would consist of small farmers, professional men and 
small tradesmen, who were attracted by the salubrious climate of 
California, and by what they believed to bQ the great productive 
possibilities of California lands. 

Rural Development Arrested in California 

As a member of the California State Rural Credit Commission 
I attended numerous public hearings recently held in various 
parts of the state, in order that the members of the commission 
might at first hand get information concerning existing condi- 
tions and the need for a state rural credit system and state coloni- 
zation plan. The testimony gathered at the§e public hearings 
has made it plain that California, at this time, finds itself in a 
state of arrested rural development. Most of the large coloniza- 
tion schemes that have been brought into life in the last several 
years have resulted in the loss on the part of the capitalists of 
untold millions. Our attention was drawn to one California 
enterprise alone, in the Sacramento valley, in which the capitalists 
within 4 or 5 years, had sunk over $7,000,000. Out of the 
hundreds of most desirable settlers that had been brought to this 
particular colony, some of whom have lived there 1, 2, 3 and 4 
years, the testimony was to the effect that over 90 per cent were 
unable not only to meet their annual obligations for payments on 
the land, but even the interest on such obligations, that their 
little all had been consumed, that they saw nothing but ruin 



HARRIS WEINSTOCK 331 

staring them in the face, with the ultimate end of returning to 
the cities and joining the ranks of the unemployed. 

All this was the result, despite the fact that California soil is 
the richest in the world, that we have the finest climate in the 
world, that water for irrigation purposes is abundant, and that 
we have the world's greatest markets at our very doors, the hun- 
dred or more millions of consumers in America, to say nothing of 
foreign markets for California products, and despite the further 
fact that these settlers, as a rule, had body and brains and energy 
and character. 

The cause of the failure, therefore, was not the conditions in 
California nor the ability of the settlers, but was due to an in- 
sane and unscientific system. 

Contrast these methods and their results with the methods and 
results, for example, pursued in Australasia. In Australia, the 
state itself sends out its soil experts. When these experts find a 
body of suitable land the state buys this land at the lowest pos- 
sible price, drains or waters it, as the case may be, puts it into a 
tillable condition and sells it to selected colonists, at actual cost 
accepts as a first payment 5 per cent of the cost of the land, plus 
one-third of the cost of the improvements, with interest at 4 per 
cent on deferred payments, plus one-half per cent for cost of, 
state administration, plus ll^ per cent on the principal, making 
an annual payment of G per cent, which payment in 30 years 
wipes out the debt. In addition to this, the Australian state fur- 
nishes to the homeseeker a farm adviser, who keeps the settler 
from making the blunders of ignorance in planting the wrong 
thing at the wrong time in the wrong place. Now, contrast the 
difference in the possibilities of success between the Australasian 
homeseeker and the California homeseeker. The California 
homeseeker starts out with these disadvantages, — first, not being 
a soil expert, and the capitalists who promote the colonies not 
being soil experts, it is quite possible that both the capitalists and 
the homeseekers are deceived in the quality of the land, and that 
the settler finds himself in the possession of land unfit for the 
purpose for which it is intended ; secondly, the California home- 
seeker has paid a minimum of $200 an acre, including the cost of 
selling and the profits of the capitalists for land worth, in its raw 
state, say $50 an acre ; third, having no farm adviser to guide 
him and having little or no experience of his own, he is liable to 
plant the wrong thing at the wrong time in the wrong way; 
fourth, to win out, the land, especially during the first several 



332 MARKETING AND FARM CREDITS 

years, must produce enough to enable him to pay, say a fifth of 
the purchase price, plus the maximum rate of interest on the de- 
ferred payment, plus enough to support himself and family. 

Experience has shown over and again that there is no land in 
California, or elsewhere, that can do this. The result is that 
having invested all his capital in his first payment and in his im- 
mediate requirements, when the day of reckoning comes to meet 
his second or later payments, he finds it impossible to do this, 
and he is then at the mercy of the owner, who, for a time may 
bear with him but who, sooner or later, is obliged to take back his 
land, while the settler finds himself penniless and homeless. 

Now, compare this situation with that of the Australian home- 
seeker. First, he is protected against getting unfit land, by vir- 
tue of the fact that the state itself has had the land examined by 
scientific men, and practically stands behind and guarantees it ; 
secondly, assuming that the state pays as much for the raw land 
as the private capitalist, say $50 an acre, and that it cost the state 
as much per acre to drain or water it as it did the private capi- 
talist, that would make the land cost the state $100. This would 
be the price paid by the homeseeker in Australia as against $200 
an acre paid by the California homeseeker, the difference between 
the $100 and $200 an acre being the selling cost of 30 per cent on 
the selling price and 20 per cent profit on the selling price added 
on by the capitalists on the actual cost, so that in this thing alone 
the California homeseeker as compared with the Australian home- 
seeker starts out handicapped by paying $200 an acre for what, 
under the Australian system, would cost but $100 an acre ; third, 
Australia furnishes its homeseekers with farm advisers who take 
the inexperienced settler and teach him how to plant, what to 
plant, and when to plant it, and who, in due course, convert the 
untrained tiller of he soil into a scientific farmer ; fourth, in place 
of being faced with an annual payment for the first several years 
of say one-fiith of the purchase price of the land, plus a maximum 
rate of interest on deferred payments, the Australian homeseeker 
is called upon to pay only 6 per cent a year to cover interest and 
principal, and is never faced with any lump sum payment, as is 
the California settler. 

Defects of California Plan 

To make a still more striking comparison, let me present a con- 
crete contrasting illustration. Let us start out with a 20-acre pur- 
chase, on the theory that 20 acres intensively cultivated would 



HARRIS WEINSTOCK 333 

support a family in decency, either in California or in Australia, 
and let us take in both instances settlers who have a fund of say 
$2,000 representing their lifes' savings. The California home- 
seeker would pay $200 an acre for such 20 aces, making his cost 
$4,000. The records show that it would cost him about $4,000 
more for his house, bam, stock, team, implements and utensils, 
making in all $8,000. He would be called upon to make a fir&t 
payment of one-fifth on his land purchase, — that would be $800. 
This would leave him a balance of $1,200 with which to meet an 
investment of $4,000 for improvements. He would, therefore, 
have to pay the highest price for these improvements, if he could 
get them on credit, with top-notch interest rates, because of the 
slender financial foundation of $2,000 to carry a total investment 
of $8,000. The balance of $6,000 would be due and payable, more 
especially for the improvements, within a few brief years. Under 
the most favorable circumstances, it would be almost impossible 
for him to meet these obligations within the required time, and 
if he would be unfortunate enough to make serious mistakes in 
planting or in cultivation, or if he should meet with one or more 
bad years in the intervening period, in the language of the 
^ ' Greek ' ' poet, ' ' He would be up against it ; " he would not only 
be at the complete mercy of his creditors but would find himself 
in such a hopeless condition fiziancially that there would be no 
alternative left for him other than to do what thousands of his 
predecessors were obliged to do, and abandon the whole thing 
and return to the city a wiser and sadder man. 

Advantages of Australasian Plan 

In contrast with this, the Australian homeseeker would be able 
to buy his 20 acres of guaranteed land at $100 an acre, involvmg 
a gross investment of but $2,000 for his 20 acres, on which he 
v/ould make a first payment of 5 per cent, equivalent to $100. 
Assuming that his costs for improvements would be just as great 
as for the California settler, say $4,000 and that he would be called 
upon to pay one-third as a first payment, amounting to $1,833. 
His total first payment, therefore, would be $1,433, leaving him 
out of his $2,000 a cash reserve fund of $566. Thereafter he 
would be called upon annually to pay say at the rate of 4 per cent 
interest on the balance, one-half per cent for state administration, 
and 11/2 on the principal, making 6 per cent in all, equivalent to 
$274 a year, or a little less than $23 a month, principal and in- 



334 MARKETING AND FARM CREDITS 

terest. Furthermore, his farm adviser would guide, direct aud in- 
struct him in how to do scientific farming, and the great danger, 
as the result of ignorance, of becoming a failure, through lack of 
agricultural Imowledge, would be averted. Unlike the California 
settler he would not have staring him in the face a limip sum pay- 
ment impossible for him to meet. He would never have to pay 
move than $27-i a year, say for a period of 30 years, when his obli- 
gation would be wiped out, and so long as he could pay this ti'iiiing 
amount of $23 a month, he could never be dispossessed, and he 
would, therefore, be enjoying a peace of mind and a feeling of 
certainty in striking contrast to the constant anxiety and feeling 
of uncertainty tliat must fill the mind of the California home- 
seeker living under the conditions above described. 

Australian Plan Meets Criticism 

The only arguments that can be raised against the strife enter- 
ing upon the Australian plan are : first, that it would be likely to 
become a political undertaking to be managed and controlled by 
political hirelings, chosen because of their fealty to a political 
party and not because of their fitness, all of which would spell 
to the state inefficiency, incompetency, if not disaster ; secondly, 
the risk involved on the part of the state in the event of the home- 
seeker's default. 

So far as the first criticism is concerned, that of its likelihood 
of the control and management of such an undertaking getting 
into the hands of unfit political hirelings. I am free to confess 
that I should not advise a state colonization plan for any state 
that is still under boss rule, because the worst is likely to happen, 
and the criticism made would hold good. But in such states as 
have been able to unhorse the political boss, as happens to be the 
case in my o"svn state of California, there is no reason why the 
conduct and management of the state land colonization plan can- 
not be conducted as efficiently and as honestly as in Australia or 
elsewhere. For example, these very criticisms of possible politi- 
cal mismanagement were directed in California against the state 
engaging in the industrial accident insurance business. It was 
pointed out that the insurance commission, in all likelihood, would 
be political appointees, chosen because of services rendered to the 
party rather than because of their fitness and that such appointees 
woud be in no position successfully to compete with the scientifi- 
cally trained men managing the private stock insurance com- 



HARRIS WBINSTOCK 335 

panies^ and ttat, therefore, the state would find itself hopelessly 
involved, with failure facing its efforts. It is quite likely that 
this dire forecast would have been fulfilled had California, for 
example, still been under the heel of the political boss, but living, 
as we do in our commonwealth, under the highest form of democ- 
racy, having the system of nominating primaries, enjoying thei 
privileges of the recall, the initiative and the referendum, we 
have been able to elect a fearless and an independent governor, 
who made his appointments on merit, and not because of political 
obligations. The result is that during the life of the state acci- 
dent insurance commission it has been able to do its business at a 
cost of about 10 per cent, whereas the private stock companies 
have expended for operations about 40 per cent. The difference 
in cost speaks most effectively for the honesty and high efficiency 
of its early critics. This saving of 30 per cent in the cost of 
operations in the state insurance fund has been divided between 
its policy holders and its reserve fund, and has been an effective 
object lesson that under a democracy pure and simple American 
states can and do conduct their public affairs as honestly, as effi- 
ciently and as economically as they are conducted in Australia 
and elsewhere. 

Now, so far as the second criticism leveled against a system of 
state colonization is concerned, — ^that of the risk involved on the 
part of the state, the answer is that in place of a system of state 
colonization proving a possible loss it has, in Australia especially, 
proven a decided source of profit to the state. For example, in 
New Zealand, one-half of one per cent is added on to the interest 
rate to cover the cost of state administration. The records show 
that it costs New Zealand 17 per cent, just about one-third of the 
charge made. This surplus of about one-third of one per cent 
profit to the state has not only paid any losses which might have 
been sustained, in the way of defaulting colonists, but has left the 
state a surplus fund of about one and a half million dollars since 
the system has been in operation. 

If, under the plan, the colonist should be called upon at any time 
to pay a large lump sum or forfeit his rights, there would be dan- 
ger of the state being obliged more or less frequently to foreclose, 
but in view of the fact that under the system the homeseeker is 
never called upon to pay more than an amount per year equal to 
6 per cent on his liability, the likelihood of his ever defaulting on 
this small annual payment, as has been shown by experience, is 



336 MARKETING AND FARM CREDITS 

extivnioly veiuote, and ovou if ho should default at the end of sov- 
ei-al years, the uiaviriu retained by the state of one-third on the 
uupi\>Yenieuts and 5 per eeut tii-st payment on the land, pins 
the aeeunuilated amortization payments on the part of the settler, 
plus the likelihood of an euhauoed value of the laud, is n\ueh move 
than enougli to seeuro the state ajrainst any pivbable loss. 

A Flea for State Colonization 

]\ly plea. therefoi*e, is for state eoloni/.ation to be adopted by all 
states uhere the politieal system is as purely denux>ratic as it is 
today in the State of California. 1 believe that the adoption of 
a state eolouizatiou system will enable homeseekers to become 
successful fiu'mers. I believe that a state eolouizatiou system 
will briuir about a marked change in tlie existing couti'astiug situ- 
ation between Siiy California and Australia, which at present 
reads about S5 per cent of colonization successes in Australia and 
over 90 per cent failnivs in Cjiliforuia colonization. 

I believe that a state eolouizatiou system will prove the only 
effective cure for the growing evil iu our country of absentee 
landlordism imd farm tenancy, because it will enable the moi\; 
thrifty and industrious farm tenants who can Siive a few hundrevl 
doUai^s to Ivcome converted, as they have become converted m 
other lands, into landed proprietoi-s. with all the blessings that 
such landed proprietoi-ship means to them and to the nation. 

I Ivlieve that a state colonization plan means also couvei'tiug 
the farm laborer, who may have saved up a few hundred dollars 
likewise into a landed proprietor, under conditions that will in- 
sula his success. Today the amount of money i\eeded success- 
fully to tinance a modest farm is such that it would take on the 
pai't of the average farm laborer the efforts of almost a life time 
before he could accunuilate a sufficient sum with which to engage 
in such an undertaking, whereas under state colonization, if he 
has enough to make a 5 j)er cent payment on the purchase 
price of his land and one-thii'd of the cost of his improvements, 
he would get an iunuodiate footiiig, inider conditions that would 
carry with it hope and ambition, instead of fear and dread and 
anxiety, in the matter of meeting his obligations. 

It would, theivfoiv, seem that all who keenly realize the seri- 
ous menace hanging over this nation iu the form of steadily in- 
creasing farm tenancy, with all its consequent ills to the indi- 
vidual tmd to the nation, sliould enlist iu the cause of advocating 



F. II. NEWELL 337 

state colonization and should devote themselves to the patriotic 
service of bringing about within their own states such a poli- 
tical condition and such strong public sentiment as will speedily 
lead to transplanting the Australian state colonization methods 
upon our own soil. 



NEEDS OF THE FARMERS ON RECLA- 
MATION PROJECTS 

F. H. Newell 

Professor of Civil Engineering, University of Illinois; Former 
Director of U. S. Reclamation Service 

Throughout the western i)art of the United States, and partic- 
ularly upon recently irrigated lands there exists a condition 
which demands attention. Although the number of farmers 
concerned may be small as compared with those throughout the 
east, yet the relative importance is great because these tens of 
thousands of irrigators form the mainstay of sparsely settled 
localities. Each state and community has need of these men. 
Its prosperity depends largely upon their success. If they are 
not able to maintain their families in comfort and attain a rea- 
sonable competence, the country will not receive nor keep the 
necessary population to maintain its progress. 

The United States has already invested over $100,000,000 in 
building large works for the irrigation of arid lands in each of 17 
western states. In addition, other hundreds of millions of dollars 
have been expended by individuals and corporations in reclaim- 
ing similar lands. Hundreds of irrigation systems have been 
built consisting of thousands of miles of canals and distribu- 
taries. People have been attracted from all parts of the East 
and from foreign countries. They have settled upon or pur- 
chased the reclaimed lands and are endeavoring to make homes 
upon them. At the present time there is a large area of pro- 
ductive land, more or less fertile, with water provided for its 
irrigation, and there is a population upon the land with many 
workers available. It has been assumed in the past that hav- 
ing the land and the water, the people would flock in, as they 
have done, and that then the problem would be settled as 
the newcomers would follow the example of the earlier pioneers 
22— M. F. c. 



338 MARKETING AND FARM CREDITS 

and would immediately utilize the water in cultivating the 
lands. 

There was a fallacy in this assumption and a neglect to give 
full weight to the necessity of money or credit for carrying on 
the farm operations and for properly marketing the crops. 
Under the early pioneer conditions, there was little need for con- 
sidering the question of rural credits, as the miners or stock 
raisers in the vicinity purchased readily at high prices the pro- 
ducts of the pioneer farmers. With the larger influx of popula- 
tion, however, these local markets have been swamped and the 
thousands of farmers on the newly developed areas must com- 
pete practically in the markets of the world for the sale of their 
products. 

Luring- Settlers With Roseate Stories 

Most of the newcomers have been allured by glowing stories 
of possible success and have had the idea that the lauds would 
rapidly increase in value. Many of them have literally put 
do^\Ti their last dollar on making the first payment for the land 
and water, and do not have sufficient capital to provide suitable 
shelter for their family, much less to equip a farm and keep up 
operations for a year or two. The irrigation companies, the men 
selling the land, the local merchants and others are compelled 
to furnish credit and under the conditions prevailing have been 
tempted to charge exorbitant interest rates. Starting originally 
at, say, 6 per cent or 8 per cent, for deferred payments, with 
inability to meet these, the interest rate has been steadily raised 
to 10 per cent, 12 per cent or even more. Few occupations can 
stand this interest charge or can succeed on borrowed capital 
under these conditions. 

There thus arises an insistent demand for relief, and one 
which is worthy of consideration. The difficulty is obvious in 
that the men most needing the use of adequate capital to de- 
velop their farms have little real security to offer. They have 
usually agreed to pay prices for the undeveloped land so great 
that there is little hope of obtaining complete title unless the 
time and manner of payment can be made less onerous. Land 
prices have been raised through misapprehension of the amount 
of labor and money required to put the land into good, produc- 
tive condition. For example, it is not unusual to find that a 
farmer on these irrigated lands has promised to pay $100 per acre 
or even $150 or more. He may have paid dowTi, say, $20 per 



F. H. NEWELL 339 

acre and is carrying the balance at, say, 10 per cent. To make 
this land productive, he mnst expend from $10 to $50 per acre 
in clearing and levelling it and another $50 an acre in 10 or 
20 annual installments for the water, in addition to $1 or 
more an acre each year for operation and maintenance of the 
canals. Theoretically he should be able to obtain from $30 to 
$50 per acre annually from crops when produced, but it may be 
a number of years before this can be done. 

A Growing Class of Professional Pioneers 

It is of great importance to the state that this man who has 
made the effort, who has brought his family to the new farm, 
be enabled to stay. If he is driven out by misfortune and pov- 
erty, it may be difficult to secure any one to take his place. In 
any event it is a loss of time in securing a successor. On the 
other hand, if he is provided with money or credit too easily, or 
if he feels that some one has insured his success, there is a tend- 
ency to demoralization and to a slackening of effort on his part. 
This latter condition has defeated many well meant efforts to- 
ward direct aid to the settlers on the new lands. The equity or 
real ownership of the occupant of the farm is not sufficiently 
great at first to spur him on, and, having once broken the ties 
of the old home and moved into a new country, he is easily in- 
duced to make another and still another attempt and finally 
joins tlie class of those known as "professional pioneers." 

The problem is complicated by the fact that in these newly 
reclaimed areas there is not the pei-sonal acquaintanceship or 
neighborhood spirit which prevails in older communities and 
upon which cooperation can be founded. It has not yet been 
demonstrated that any particular crop is peculiarly adapted to 
the surroundings nor have markets been established. In other 
words, all of the bases upon which credit is usually advanced is 
yet to be established. There is thus the special problem of pro- 
viding needed facilities for the men whose guarantee of success 
is largely that of personal character rather than of established 
values of the lands and crops. 



340 MARKETING AND FARM CREDITS 



THE RURAL CREDIT SYSTEM NEEDED IN 
WESTERN DEVELOPMENT 

Elwood Mead 
Professor of Rural Institutions, University of California 

One of the most important questions confronting this country 
is the creation of a land policy suited to conditions which have 
arisen in the last quarter of a century. Until recently it was 
our boast that any man who had industry and thrift could en- 
joy landed independence. That statement now needs to be 
qualified. The increase in the number of farm renters compared 
to the number of farm owners ; the colonizing of rural communi- 
ties with foreign born immigrants who can and do pay higher 
rents because they are content with a lower standard of living, 
and because they take no interest in or spend any money to se- 
cure good roads, good schools, or other matters that make men 
good citizens, are significant indications of the dangers to rural 
life which need to be removed. 

Other countries are confronted with the same problem ; many 
have gone far in its successful solution. In every case the 
foundation stone is a system of rural credits designed to enable 
men of small capital to buy and improve farms and thus be- 
come owners instead of renters. 

The West an Inviting Field for Rural Credit 

The Western third of the United States presents the most in- 
viting field in this country for the establishment of such a sys- 
tem and has greatest need for it. In this section millions of 
acres of irrigable land capable of supporting a dense popula- 
tion are either unpeopled and awaiting settlement or the settlers 
are having to undergo hardships and menaced with failure from 
causes that are removable and should be removed. High in- 
terest rates, the inability to secure money to make necessary im- 
provements of the land and the lack of direction and oversight 
of unskilled beginners, cause so many to fail before they get 
started that it is becoming an economic wrong and is not alone 
affecting the prosperity of western agriculture but of all related 
interests. 



ELWOOD MEAD 34X 

Irrigation works which have cost in the aggregate nearly 
$200,000,000 are financially unsuccessful because of delay in 
settling the land or because settlers are too poor to pay water 
charges. The nature of the obstacles that confront develop- 
ment, the hardships and losses of settlers in recent years are not 
understood by the country as a whole. The economic changes 
which have taken place in the last 15 or 20 years and the need of 
financial adjustments to conform to those changes are matters 
about which a wider knowledge is desirable. 

Up to a quarter of a century ago there was little need of capi- 
tal, or skill in agriculture, to enable men to acquire homes in 
the arid West. The settlers obtained the land as a gift from the 
government. The water to irrigate it was taken by means o£ 
ciheap ditches out of the mountain streams. Usually these con- 
sisted of nothing but a simple furrow built with the settler's 
OT\Ti labor. What is now the highest priced farming land in 
Colorado, and in practically every other western state was ob- 
tained from the government for nothing or purchased from rail- 
road land grants at from $2 to $5 an acre. To build ditches to 
water these lands cost only from $3 to $10 an acre; the man 
witih $1,000 to $2,000 had ample capital to acquire and improve 
a 160-acre farm. 

When 20 years ago John Brown, a farmer from Nebraska, 
went to Wyoming and bargained with parties building a 
small irrigation ditch to pay $10 an acre for a water-right to 
irrigate his 160-acre homestead, he was told by a neighbor that 
that price was prohibitive ; he could never pay it, and the best 
thing he could do was to jump in the river and end his troubles. 
The neighbor's view was governed by the fact that his water- 
right had only cost $3 an acre, and up to that time $5 an acre 
had been the maximum limit of cost. 

John Brown, however, did not drown himself ; nor did he fail. 
The whole debt for land and water was $1,600, and he had 
brought with him $1,000 cash. With that he bought a team, 
built a log house with timber cut from the public land, bought 
a few range cows and pastured them on the public domain with- 
out paying any rent. He helped build the ditch and so worked 
out part of the cost of his water-right. In 2 years he was out 
of debt, making money on his range cattle. It took him 10 
years to level and prepare all of his 160 acres for irrigation, 
and the work was not done as it must be done today to enable 
settlers to succeed. 



342 MARKETING AND FARM CREDITS 

In the last 15 veal's these natural opportunities have disaj>- 
peaivd. The free land that was easily irrigated is gone. The 
streams that eonld be diverted by simple channels have been ab- 
sorbed. To obtain water for irrigation, great rivers have to be 
controlled and tlood water eonserved by the building of eostly 
resei"\'oirs. The railroad lands that could once be obtained at 
from $2 to $5 an acre have passed into private ownership. In 
one way and another great landed est^ites control some of the 
best undeveloped areas. The actual construction cost of irriga- 
tion works built in the last 5 years varies from $30 to $100 an 
aci'e. Unimproved privately owned land under those works 
sells from $15 to $100 an acre. 

The John Bro\\'n that attempts to settle in the West today is 
confronted by far greater obstacles than the John Brown t^xf 
20 yeai-s ago. The free timber that built his house, the free 
range that pastured his cows, lu-e the exceptions ratlier than the 
rule. The early settlers selected the land that could be irii- 
gated at lowest cost; the land that is left requires, as a rule, 
more work to prepare for irrigation and tJie work must be done 
better, because it must produce more abundantly than when 
land was free, and water-rights cost only a nominal sum. There 
are thousands of acres under costly irrigation projects where 
the average cost of leveling for irrigation is $50 an acre. The 
John Brown of today can not prolong this preparation over a 
period of 10 years. Interest charges, land and water-right 
payments nuike it desirable that he had it fully productive in 
the shortest possible time. The old individualistic development 
has disappeared, but we have not yet replaced it by the organiza- 
tion, the oversight and the capital needed to enable the settler 
of smaU capital to meet the new conditions. 

Irrigation Lajid Comes High 

There are few places in the West where improved irrigable 
land can either be purchased or raw public land improved for 
less than $100 an acre. To the cost of the land there has to be 
;added the cost of a water-right, the cost of preparing the land 
for irrigation, the cost of uuprotitable cultivation for a year or 
two while the soil is being cultivated. The house, the fences, 
the implements, and the livestock, all needed to make it a going 
concern, involve an expenditure gi-eater tlian has been usually 
realized and greater than most settlei-s ai-e prepared to nu^et; 



ELWOOD MEAD 343 

yet the larger part of this expenditure must be made immedi- 
ately because it is the only way in which he can make a living 
and pay interest on the cost. If the settler can once get his farm 
improved and productive and especially if he can have time 
enough in which to earn the money from the land, he nearly al- 
ways succeeds. The profits of intense cultivation are great and in 
some directions like livestock are continuous and reliable. What 
he needs and must have is capital or credit to improve, equip 
and stock his farm, so as to enable him to follow intensive sci- 
entific agriculture. 

The department of rural institutions in the University of 
California and the Rural Credit Commission of California are 
making a first-hand investigation of the cost of preparing land 
for irrigation, the cost of equipping a farm, of the time which it 
requires the average settler to make needed improvements, and 
the plight in which he finds himself when he makes the attempt 
without adequate capital and has to depend on existing credit 
facilities. The results already obtained show that many settlers 
with from $1,000 to $3,000 find themselves in debt and without 
credit before they have their land prepared for irrigation and 
are unable to go on because the commercial banks cannot lend 
money except on revenue producing property and no reliable 
land mortgage company will loan except on first mortgage se- 
curity. Some settlers are able to obtain money on their per- 
sonal credit, but in those cases the loans are usually for a short 
time with commissions for obtaining the loan and for its renewal 
and with interest rates varying from 8 to 12 per cent. The set- 
tler has therefore to pay interest rates above the profits of agri- 
culture and has always before him the ever impending menace 
of a mortgage foreclosure. 

The absence of adequate credit facilities, absence of organized 
oversight of settlement is an economic wrong to the settler in 
many ways. He needs livestock to consume his fodder crops 
and if he could purchase these he could often make money where 
he is now losing it. Instances were found where men last year 
sold their alfalfa for $1 a ton in the fields, wherein, if they had 
been able to buy livestock, it would have been worth $15 a ton. 
Scores of settlers were attempting to cultivate crops for which 
the land and climate were not suited and who had lost through 
mistakes, that intelligent oversight would have averted the money 
that would have pulled them through the critical period. 



344 MARKETING AND FARM CREDITS 



Much Waste on Irrigation Projects 

No one can visit a developing irrigation district ^vithont real- 
izing the waste involved in leaving each individual settler to 
carry out his improvements without organization or expert di- 
rection. No beginner can level land properly — no individual 
settler can afford to buy the proper implements, and as a result 
each one of them wastes time, labor and money. Leaving each 
individual settler to buy the material for his house and arrange 
for its construction causes him to lose time that ought to be 
spent on cultivation, makes the cost more, and the result far 
less than if this was done under some comprehensive plan. This 
is being demonstrated in California, where Dr. Dwinnel is 
building houses, leveling laud and planting ali'alfa on a part of 
each farm before it is sold to settlers. Buying in large quanti- 
ties at wholesale rates, employing carpenters on contracts which 
let them work on days when they have nonregular employment 
elsewhere, he has actually fui*nished the material and built 
houses for less than the carpenters charge for their labor in deal- 
ing with the individual settler. 

In one district visited recently the fields were dotted with al- 
falfa st-acks. It was a picture of seeming agricultural pros- 
perity ; yet many settlers in that district were dead broke and in 
debt. They had spent all their money prepariug to grow alfalfa 
and there was no market for hay. If they sold hay they had to 
sell at less than cost. Fat cattle and fat sheep brought high 
prices and the profitable way of marketing their alfalfa was to 
feed it to cattle and sheep. But, as one settler expressed it, 
there was no use to talk to them about that because they had no 
money and not credit enough to buy a suit of clothes. One set- 
tler was financed by a local banker in buying 10 dairy cows. 
For the risk the banker charged him $10 a cow above the pur- 
chase price. He required the settler to give one-half of the re- 
turn from each cow. The settler paid a la"«wer $10 for prepar- 
ing a chattel mortgage; $4 for recording it. Hence, to begin 
with, he was loaded with $11.50 a cow above the cost price. 
Every good dairyman has to cull his herd; some of these cows 
were unprofit<ible. He wanted to sell the poor ones and buy 
good ones, but the banker insisted on a new chattel mortgage 
every time this exchange was made. In six months ' time he paid 
out more in legal fees, lost time in consulting the banker, ami. 
recording new mortgages than his profits. 



ELWOOD MEAD 345 

One settler who had 320 acres of government land and a title 
to it borrowed $10,000 to be spent in leveling it for irrigation. 
To get that money he paid a commission to the loan agent of 
$500. He agreed to pay 10 per cent interest with 6 months' 
interest in advance ; that was another $500. He was required to 
insure his life for $10,000, the policy being drawn in favor of 
the lender; that cost $200. He actually received of his $10,000 
loan $8,800, and for that he had to pay each year $1,200. The 
agriculture of improved farms will not stand interest charges of 
that character, and yet these are not isolated instances. The in- 
vestigation referred to has shown scores of the same character. 

Mortgage Indebtedness Is High — Interest Rates High 

In one district the average farm mortgage indebtedness over 
the whole area of nearly 200,000 acres is $50 an acre ; on some 
farms the indebtedness is far greater than the average, and the 
chattel mortgage indebtedness on the same area is about $15 an 
acre. The interest rate with commissions will average some- 
where between 10 and 12 per cent and to this has to be added 
heavy payments on the principal. If, instead of 10 per cent 
interest, these settlers could obtain money at 5 per cent, it would 
mean an annual interest saving to the farmers of this district 
of over half a million dollars, and to some settlers this interest 
saving would mean over $5 an acre a year. Yet 5 per cent in- 
terest is about the highest rate of interest paid in any country 
having an effective rural credit system. If, instead of having 
to pay off the debt in 5 years, they could have amortized pay- 
ments extending over 30 years, it would mean that the average 
payment on the principal in this district would drop from $10 
an acre a year to 75 cents an acre a year. This change would 
mean a saving to the settlers of this district during the early 
trying years of over a million and a half dollars a year ; it would 
mean the difference between success and failure, between confi- 
dence in the future and harrassing anxiety. It would mean 
good food, good clothing, and comfortable living for thousands 
of settlers and their families which are lacking today because 
we have a wholly unscientific system. 

It is not a sufficient answer to the objections to present con- 
ditions to say that many settlers succeed. That shows the high 
quality of the settlers and gives reason for confidence in the re- 
sults that would follow the adoption of a scientific land settle- 
ment policy. The fact that emigrants could pross the plains 



346 MARKETING AND FARM CREDITS 

■with OX teams did not prevent the building of railroads or make 
them less valuable. 

Such a policy would induce the purchase of land, where pub- 
lie land was not available, its subdi\-isiou into farms which would 
make li^vdng areas, that would vary with the settler's capacity 
and the size of his family. It would mean the exclusion of all 
those who now own land, because this would be intended as an 
opportunity for the renter and the young men of both city and 
country. It would mean reserving the land for qualified settlers, 
and having those qualifications investigated in advance. This 
would not deny any deserving settler an opportunity, but it 
would save many unfit from making a mistaken attempt. It 
would mean lending money needed for the improvement and 
equipment of farms, and exercise an oversight over certain kinds 
of improvements like building houses and leveling land, where 
expert knowledge and skiU will save both the settler's money 
and time. 

Object Lesson From Other Lajids 

There is nothing new about a system of this kind. It is in 
operation in Ireland, Denmark, Italy, in Germany, and British 
South Africa, and in the Australian states. The most striking 
object lesson for this country is, however, to be found in the 
Australian states and New Zealand. These new countries, which 
are leading the world in many humanitarian experiments, have 
the most highly organized and most successful rural credit sys- 
tem of any country. If the commission that went from America 
to study the rural credit systems in Europe had visited Australia 
as well, there would have been no difference among them as to 
what should be done in the "West. The British Columbian com- 
mission which visited both Europe and Australia has adopted 
the Australian system. It is identical in its principles with a 
system in operation in the development of agriculture and the 
financing of farmers in German Poland in the great territorial 
province of Germany in South Africa. 

My belief in the Australian system is based on an acquaintance 
of 8 years as a member of the commission that was entrusted 
with the management of state aid in irrigation settlement in the 
Australian State of Victoria. 

When I went to Australia conditions there were almost a di- 
rect counterpart of those now confronting irrigated agriculture 
in this country. Costly irrigation works had been built but the 



ELWOOD MEAD 347 

water was not being used. The number of farmers on irrigated 
areas was decreasing. Men who were without capital could not 
buy the land and those with capital did not care to. Irrigation 
works were unprofitable, because there were not enoug'h people 
on the land to cultivate it as successful irrigation requires. 

Land Settlement a Social and Economic Problem 

The government determined to change this, and it considered 
2 plans. . One was to further extend existing tenant farming 
which would not disturb the large estates. The other was to in- 
augurate, through government purchases and subdivision of 
large farms, a rural life in Which each man would own the house 
he lived in and the soil he tilled. The state began an investiga- 
tion to find out how much land was needed to make a living farm 
area and how much money would be required to improve and 
equip that farm for intense culture. It made a study on the 
ground of the state rural credit systems of New Zealand, Ire- 
land, Denmark, and Italy. In all this study of what the state 
could safely attempt, land settlement was considered as a social 
and economic problem rather than a means of making a profit 
out of land sales. 

This preliminary study showed that the success of a settler 
largely depends on 2 things: First, obtaining a living income 
from his farm within a year; and second, getting the whole of 
his land into cultivation and production inside of 2 years. 

The state's plan provided for the purchase and subdivision of 
land into different sized areas, the smallest being 2-acre blocks 
for the farm laborer. This gave such laborer a home for his 
family, enough land to keep a cow and some poultiy and grow 
his fruits and vegetables. It tied them to the soil and has 
changed their nomadic character. No feature of this system 
has proved of greater economic or social value than the 2-aere 
farm laborer 's block. The number originally established in each 
district has subsequently been increased with the increased de- 
mand for labor as the land was brought under intense culture. 
The state provided for building houses, because it could, through 
building a large number of them give skilled oversight of con- 
tractors, and it protected the district from the unsightly make- 
shifts the settler would perpetrate. A district with all the 
houses properly built, newly painted and provided with those 
things that go for decency and comfort, becomes a source of 



34S MARKETING AND FARM CREDITS 

piide and a stmmlus to ettort of every luau who finds a home 
there. 

The state at first undertook the leveling of 10 or 15 aoros of 
land on each farm and the seeding of it to alfalfa so that each 
settler would be insured the feed for his work aiiiuials and his 
cow the first year. Later on this was changed to the seeding 
and leveling of about three-fourths of every farm if this was 
desired and doing a oonsiderable portion of tnis work in ad- 
vance of settlement. As a result, it frequently occurred that 
settlers who took up dairying wei*e able to obtain a living in- 
come within 30 days of their arrival. At first the state left 
every settler to buy his own tools and buy his o^^^l livestock but 
when a new settler from England paid $125 a piece for cows 
which was the price in England, while tlie market price in Au- 
stralia was $50, and when it was found that the new settlers 
wei*e being victimized, the state placed at their disposal an expert 
b\iyer of dairy cattle who by getting in touch with the dairying 
districts of three states, buying the stock in these districts, es- 
pecially buying young stock, tlie settlers were saved from the 
purchase of worthless animals and provided with good ones at 
about one-half what they would have had to pay if left to do 
this without advice or aid. 

Technical Instruction Must Supplement Land Purcba,se 

The most important feature of the system was, however, the 
placing on eacli district of a farm instructor and adviser. He 
was there to be consulted by the settlers whenever they desired, 
but it was also his business to drive continually through the dis- 
trict obser^'ing the habits and methods of the begiunera, to cor- 
rect their mistakes when seen and where they refused to adopt 
proper methods or showeil the lack of industry and pei*sistence 
it was his duty to notify the authorities in charge and having 
this warning the authorities were careful about making loans of 
money for nnprovements or extension of time on payments. 
The infiuence which this exerted on the methods of the farmer 
and on the agriculture of the district was immediate and im- 
portant. 

The features of this scheme wliich served to protect the tax- 
payer from loss were, first, that the board administering it 
was non-political. It was appointed for a long term and only 
removable for cause. The money was of com*se j^rovided by 
Parliament, but no political pi*essure or influence controlled its- 



ELWOOD MEAD 349 

use. The land that was purchased was purchased at a price 
fixed by 3 impartial valuers, oomplote publicity being given 
to these valuations and to prices paid. The state in all cases 
owned the land. The money advanced was expended in the 
improvement of its own property and the settler was required 
to pay a preliminary deposit of 3 per cent on the land, and to 
pay, as a rule, about 40 per cent of the cost of the house or 
other buildings erected; and about 20 per cent of the cost of 
leveling the land. Where the settler made improvements, the 
state could lend him up to 60 per cent of the value, but this 
was optional with the the authorities and such loans depended 
quite largely on the record made by the settler for industry 
ana thrift. 

Advantages to Settlers 

The advantages to the settler were these : He only had to 
make a small payment on his land; had only to pay part of the 
cost of his house and improvements and that left him out of 
his meager capital money enough to buy his equipment. He 
had the advantage of expert advice and expert knowledge and 
skill in the carrying out of improvements and in the cultiva- 
tion of his land; and then he had low rates of interest with 
amortized payments of principal extending over 361/2 years. 
Before this system went into operation in these states settlers 
often had to pay up to 5 per cent commissions to obtain money, 
and the average rate for money in New Zealand was 9 per 
cent. On these loans the settler pays 41/2 and 5 per cent in- 
terest and 11/2 per cent on the principal, so that instead of pay- 
ing about 10 per cent interest alone, he now, by paying 6 to 
6V2 per cent pays both interest and principal. 

In New Zealand the state obtains the money for these loans 
by the sale of bonds in London. In the Australian states they 
borrow it, as a rule, from the state savings bank. In 2 states 
they obtain it quite largely from the Commonwealth Postal 
Savings Bank. In either case they pay 4 per cent interest and 
where they lend it at 41/0 to 5 per cent, there is 1/2 to 1 per cent 
margin and this margin is intended to meet expenses of man- 
agement and losses where settlers fail to meet their obligations. 
A full report of the financial operations of the different state 
systems is given in a recent report of the commission of British 
Columbia; but in Victoria the accumulated surplus out of the 
difference between the interest paid by the state and the inter- 



350 MARKETING AND FARM CREDITS 

est paid Jby the settler amounted in the last annual report of 
the premier to do something over $500,000. The great social and 
economic benefit that comes from this aid to settlers has not 
heretofore cost the taxpayer anything. On the contrary there 
is a credit balance to his account. 

How Much Capital Must a Settler Have? 

There was much difference of opinion at the outset regard- 
ing the capital wliich a settler should have. This was at first 
fixed at $1,000. Since then it has been made more flexible. 
The capital depends on the size of the farm the settler pur- 
chases amd something on his own personal qualifications. No 
one is allowed to buy land under these conditions who is al- 
ready a landowner, and actual settlement is insisted upon. 
Title to the land does not pass for 12 years, but the settler can 
sell his interest at any time before that provided the buyer 
conforms to the restrictions governing the original settlement. 
The maximum value of land purchased by one settler is $12,500, 
and ths maximum amount whicli the state can expend in the 
improvement of his farm is $2,500. On the 2-aere blocks or on 
blocks for farm laborers, or on areas of 10 acres or less the 
capital of the applicant is not considered. He is only required 
to make the payments on the land and the part pa^Tuent on 
the house and other improvements. On these small blocks the 
settler can meet the payments from wages, but when the hold- 
ings come above 20 acres then the income must be far more 
than the settler can earn by wages if he is to succeed, and the 
rule is now to require men desiring farms of 20 to 50 acres to 
have a capital of $1,000. and above that to have a capital of 
at least $2.000 ; but in practically all such cases where the 
settler has less than $5,000 capital the state expects to furnish 
$2 for each one put in by the settler in the improvement and 
equipment of the farm. There have been instances of settlers 
who borrowed the money to make the original payment and 
yet have met promptly each payment to the state. In every 
case where the settler was industrious and efficient this aid 
enabled him to succeed ; but it was perfectly apparent to all 
those who observed this development that if these settlers had 
been compelled to meet all these payments unaided, two-thirds 
of them would have failed. It is equally clear to all who have 
made a first-hand study of conditions in developing areas in 
this countrv that imless some such svstem is introduced here 



ELWOOD MEAD 351 

future settlement should be restricted to men of considerable 
capital, say $3,000 each on public land and $5,000 each on land 
privately owned. 

A Way of Checking the Rural Exodus 

The adoption of this system . by this Australian state has 
stopped the drift of the young men from the country and at- 
tracted to the land scores of young men from the cities. It 
has created opportunities for hundreds of poor men who with- 
out it would have never been landowners. Under its opera- 
tions more than 4,000 farmers, all starting with limited capital, 
now live in their own houses and are landed proprietors. It 
has given the people better houses at less cost, better livestock, 
better tools than they could have obtained without the financial 
aid and the expert knowledge and advice that went with the 
system. How it is regarded where it is in operation is set 
forth in the last budget speech of the premier of Victoria. 

The most gratifying feature connected with the state's in- 
vestment is the improvement in scientific agriculture. The 
final success of this investment depends on the returns which 
can be obtained, and in this respect the state stands in an en- 
tirely different position from that occupied 5 years ago when 
is made intense culture combined with closer settlement the 
basis of future development. This was an experiment, the 
success of which was doubted by many; now it is a demon- 
strated success. Over large areas in widely separated districts 
more than 10 times as many families are settled in comfort- 
able homes, under attractive social conditions as were there 5 
years ago, and they are obtaining returns from their holdings 
that even less than 5 years ago were regarded as impossi- 
ble. Notwithstanding the fact that many of the settlere were 
inexperienced and lacked capital, the small irrigated farm is 
paying well. 

Cooperation Not Basis of Land Settlement 

Many in this country are opposed to state action on the 
ground that the state is incompetent and that all this should 
be left to private enterprise. There is much meaningless talk 
about what can be done through cooperation. A conclusive 
answer to this is the success of those rural credit systems oper- 
ated with funds provided by the state in countries with condi- 
tions and needs like ours, and the absence of a single success- 



352 MARKETING AND FARM CREDITS 

fill system of land settlement throiigli either private of cooper- 
ative rural credit where the conditions are like ours. Ger- 
many with that thoroughness and business sagacity so charac- 
teristic of the nation did not attempt to employ the landschaft 
or any other cooperative system in aiding German farmers to 
become land owners in Poland or Southwest Africa. Instead 
it adopted direct state action, identical in its working features 
with the system of New Zealand and the Australian states. 

The state is the proper authority to provide the money. It 
is the only authority in a developing district where all men 
are borrowers, where values are being created, where the peo- 
ple are new to each other and where they are strongly inclined 
to be individualistic, that can provide cheap money. And the 
state has reasons for doing this that do not prevail with either 
private or corporate enterprises. The basis of state action is 
the general welfare, the creation of better conditions in rural 
life, the bringing into cultivation of unoccupied land, the in- 
crease in t-axable wealth and trade ajid commerce. All these 
things are gains for the public, of which the state is the repre- 
sentative. The federal government and the states own much 
of the land to be peopled. The federal government has about 
$100,000,000 invested in irrigation works. The financial re- 
turn from these works and the welfare of the settlers living 
under them can in no way be so effectively helped as through 
the establishment of a state or government rural credit system 
like that of Australia. The money for these loans in Australia 
comes almost entirely from sa\'ings banks. If the federal pos- 
tal savings bank system in this country was changed so as to 
make the interest rate Slo per cent and the limit of deposits 
$2,000, there would be an ample fund in this country with 
which to carry out this work. 

In addition the state has already in its experiment stations 
and the officers appointed under the Smith-Lever bill a body 
of expert advisers familiar with local conditions. It would 
only need an increase in their number to do aU that is being 
done by the advisers of the rural credit system of Australia, 
and with the power that this system would give them their 
influence would be far more potent than it now is, and the 
progress of agriculture correspondingly accelerated. 

If we adopt this system we will have the experience of a 
number of countries to guide us ; we do not have to break any 
new trails. It will be in no sense an experiment. It will be en- 
trusting the creation of new communities and the shaping of 



JOHN LEE COULTER 353 

their social and industrial life to the only authority which 
should exercise that power and the only one that has the re- 
sources, the continuity of existence, the disinterestedness 
needed to insure the results desired. 

There need be no fear of the ability of a state to render a 
direct service to the people and to do this with economy and 
efficiency, if the raanageraent is made non-political and placed 
in the hands of competent men who have a long- tenure of of- 
fice. 

During the last 30 years I have worked for private enter- 
prise and for the state, and it is my conviction that men will 
work harder for the state and in the interests of public welfare 
than they will for a corporation whose motive is profit. I am 
quite sure that there is no corporation in this country whose 
employes worked harder or longer hours or took keener in- 
terest in their work than did the officers of Victoria connected 
with the management of its rural credit system. If this sys- 
tem is made non-political and if in its working methods there 
is incorjoorated the safe-guards that have made the Australian 
system so continuous and so conspicuous a success, or those in- 
corporated in the British Columbia law, or outlined in the re- 
port of the Wisconsin State Board of Public Affairs, there need 
be no misgivings as to the results. 



THE LANDLESS MAN OF AMERICA AND 
HIS NEEDS 

John Lee Coulter 

Dean of the College of Agriculture and Director of the West Virginia 
Agricultural Experiment Station 

So much has been said during recent years on the general 
Cjuestion of rural credits that is seems to me there is great con- 
fusion in the public mind. It seems to me we would make 
greater headway if the broad general subject of rural credits 
could be divided into 3 or 4 parts and each separte part con- 
sidered as a separate proposition. In order to do this I desire 
to fii*st call your attention to the fact that: 

There are in the United States about 6,360,000 farms, and 
therefore approximately the same number of farm families. In 

23— M. F. c. 



354 MARKETING AND FARM CREDITS 

addition to this there are probably 2i/^ million farm laborers, 
or possibly I should say that number who are employed from 
time to time by farmers for a given rate of wages, I also de- 
sire to call your attention to the fact that all of these people 
need small loans (personal short term credit), while on the 
other hand only those ivJio own and operate far-^ms are directly 
and immediately concerned with long term land mortgage 
credit. 

Those who do not own farms but who as tenants or hired 
laborers work on farms, no doubt all desire at some time to 
become land owners, and therefore desire but do not have the 
basis for long term mortgage credit. In this discussion I am 
going to entirely omit consideration of long term mortgage 
credit in so far as it pertains to farmers who now own farms. 
In other words : 

I intend in this brief discussion to consider only the 2,360,000 
tenants, — those who operate farms but do not own them — and 
the 2,500,000 farm laborers who work for others than their 
parents for wages. You will see at once that I have a group 
here of something like 5 million men who are now properly 
classed as landless. They are to a very large extent the future 
hope and salvation of the nation. We dare not overlook them 
in working out a program if we are concerned with the funda- 
mental needs of the nation and if we are anxious to place agri- 
culture on a fair and successful footing. 

The Tenant 

In order that there may be no confusion I wish first to 
briefly consider the problem of the tenant, in so far as he is a 
landless man. I shall then briefly consider the situation of the 
laborer, I wish first to point out the great number of tenant 
farmers who are sons or sons-in-law of the owners of the farms 
on which they live. I have made a particular study of this 
particular point, and when we realize that all, or almost all of 
the present 6,360,000 farm operators will be dead 50 years 
from now, we must be impressed with the fact that there will 
be as many or almost as many young men and women inherit- 
ing farms. It is not necessarily an evil in a nation of this size 
if there are a few tenants. I do not pretend, however, to main- 
tain that all of the tenants in this country come into this class. 
I am inclined to believe that if tenancy were approximately 
uniform all over the nation and amounted to not over 121/2 



JOHN LEE COULTER 355 

per cent of the total number of farms, there should be no 
worry since the 800,000 tenants would be merely the sons and 
sons-in-law who soon would become owners through the nat- 
ural process of inheritance. Of the 2,360,000 tenants in this 
country, therefore, I am inclined to eliminate 800,000 and as- 
sume that they will be taken care of without any extraordi- 
nary steps. This, however, leaves approximately l^/^ million 
or two-thirds of all tenants at the present time. 

A Second Class of Tenants 

I wish now to call attention to the second class of tenants, 
and it seems to me they should be seriously considered. I 
have in mind possibly as many as one-half million tenants who 
are industrious, who are farming to the best of their ability, 
who are saving some part of their returns, and who hope in 
due course of time to become owners. 

These tenant farmers should be helped in every way possi- 
ble. "What shall we do for them? In the first place give them 
every opportunity to improve their farming through agricul- 
tural education of every kind ; second, help them in every way 
to market their products to the very best advantage so that 
they may get proper prices for their products and thus be able 
to save the larger fraction of their gross income ; third, give 
them an opportunity to invest their savings to the best possi- 
ble advantage so that they may rapidly accumulate enough to 
make a first payment on a farm ; and fourth, provide a system 
of farm land banks so that they may pay in cash 40 or 50 per 
cent of the value of a farm which they have in mind, borrow- 
ing the remaining amount necessary and thus becoming own- 
ers at as young an age as possible, and paying the remaining- 
amount due out of the products of the farm. I believe this 
to be a thoroughly practical program and one which if details 
were worked out carefully would result in bringing 500 thou- 
sand tenants into ownership as a result of their own industry^ 
I am confident that these progressive and vigorous young men 
and their families do not ask the government for special con^ 
cession any more than the 800.000 who will inherit their farms 
from their parents. 

Up to this point I do not advocate any direct government 
aid in this matter, but simply a substantial and practical pro- 
gram making it possible for vigorous young Americans to be- 
come owners of farms which they now operate as tenants. 



356 MARKETING AND FARM CREDITS 

But I have left one million farm tenants. I believe they 
belong to 3 prineipal elasses. iSoiue of theui (I enter an 
estimate of as many as 250 thousand) eould become owners if 
they ehose but prefer to live as tenants using their capital for 
investment in live stock and equipment, believing that land 
and buildings are too high, confident that they can secure as 
much net return as tenants as otherwise, and willing to con- 
tinue in their present status or in some other status which 
they may choose for themselves. Of this much i am sure, there 
are many of this type and the number I believe is increasing. 
T found this same type in many European countries and am 
oonvinced that no steps should be taken which try to compel 
^11 such tenants to become owners. With farm land banks 
these tenants might become owners if they chose. They might 
invest their surplus in bonds and thus technically be practical 
ownei's of land even if they continue as tenants on land they 
do not own. 

The second class which I have in mind which goes to making 
up this last, is the innnense number of tenants who are incom- 
petent. I do not wish to be harsh, but I believe I am making 
a very conservative estimate when I say that I believe there 
are something like 500.000 in this class. It would not sur- 
prise me if the number were as great as 636.000 or 10 per 
cent of the total luuuber of farm operaitors in the United 
States. This class is a very different one to deal with. For 
the national government to lend these incompetent tenants the 
government's credit, it seems to me would be a serious mis- 
take, unless a system of education and supervision is worked 
out in such detail as to make it practically certain that these 
tenants having become owners would be educated and super- 
vised in such a way as to be sure that they would carry out 
properly the system of farming which woidd make it possible 
to eventually pay the nation or the state the amount originally 
advanced. I have in mind here that it is absolutely necessary 
to study the peculiar characteristics of men whether they be 
farmers or other business men. Some men naturally have in- 
itiative, perseverance, foresight, frugality, etc. — othei*s seem to 
be quite lacking. I feel that it would be the greatest error 
ever initiated by the government to promiscuously turn over 
government credit for the use of all types ,- hence I say until 
we have some satisfactory scheme of agricultural education 
.and direct supervision it would be unfortunate for state or 



JOHN LEE COULTER 357 

nation to attempt to bring this class from the status of ten- 
ancy to the status of ownership. 

This leaves us not more than 150,000 or at most 250,000 
to go to make up the last million. I believe that this is a 
fair estimate of the total number of farm tenants who are 
farm tenants because of some misfortune or because of some 
slight error in business such as a defect in title to farm land, 
etc. Some of these are tenants because they married too 
young and have attempted to rear too large a family and have 
thus been unable to accumulate funds for the purchase of a 
farm, others in various small sections of the country are ten- 
ants because of overflowing of rivers from excessive rains, or 
droughts, or sudden attacks of some injurious insect such as 
boll weevil, or national policy (repeal of tariff on sugar might 
have been a good illustration), or very great loss from 
disease among animals, etc., etc. Of this number probably 
many have reached such an age that to try to convert them into 
ownership would be a failure. The great body of these should 
be aided in some way by the state. I do not believe that the 
national government can do much, because it has no machinery 
to elect or sort out this particular class. Furthermore, the 
number varies from state to state. I believe that individual 
states should evolve a land policy looking toward the state 
purchase of tracts of land which are now too wet or too dry 
or otherwise undeveloped. This land might be divided into 
farms and sold on advantageous terms to the proper type of 
tenant who desires to become owner. 

Constructive Suggestions 

One need for all classes is a thoroughly up-to-date and mod- 
ern state bureau of farm lands. This bureau should have a 
complete list of all farms in the state and should constantly 
be revised to show what farms are for sale, what farms may be 
rented, etc. This bureau is as important from the standpoint 
of tenancy and land ownership as a labor employment bureau 
is from the standpoint of giving proper employment to la- 
borers. 

It would seem from the discussion above that in conclusion 
I should recommend the following as the first steps to be 
taken : 

First: An act of Congress providing for a complete scheme 
of farm land banks. 



358 MARKETING AND FARM CREDITS 

Second : Acts of the various states supplementing the na- 
tional law providing for institutions to do various phases of 
the mortgage business Avhich the national farm land bank 
would not care to undertake. 

Third: Legislation by the various states simplifying laws 
pertaining to titles, deeds, foreclosures and exemptions. 

Fourth: An up-to-date state bureau of farm lands with 
complete lists of farms for sale and farms for rent, and as 
much detail concerning these as possible. 

Fifth : A thorough scheme of rural education with county 
organizations so perfected that the county headquarters would 
have a complete list and careful rating of every farm operated 
within the confines of the county. 

Finally, such state legislation as necessary to take over by 
some public service corporation lands not already developed, — 
these to be developed, parceled, and sold on advantageous 
terms to select farmers who do not now own any land but are 
seeking to become permanent settlers living upon and operat- 
ing their farms. 

Hired Farm Laborers 

I have made an extensive study of hired farm laborers, and 
as far as I have been able to complete my investigation much 
the same classes or types are found here as among tenants, 
only that they are one more step removed from farm owner- 
ship than are the tenants. In addition to the classes noted 
above, however, large numbers of farm laborers are casual 
laborers who during other seasons of the year work in the 
cities, towns and villages, or in mines or forests. These casual 
or transient farm laborei's do not desire generally to perma- 
nently settle on farms, and no special provision need be made 
for them. 

Another class of farm laborers which we do not find so fre- 
quently among tenants is that a great number of young men 
who drift out from the great cities during the busy harvest 
season, and they again are temporary or transient and would 
likely call for no special treatment. 

The third class of hired farm laborers not so frequently 
found among tenants is that other considerable class of un- 
married transient laborers not uncommonly designated as 
tramps, hobos, bums, etc. Many of these are wrongly named ; 
they belong to other classes. On the other hand many of these 



JOHN LEE COULTER 359 

are of this class, and the principal need is to provide cheap 
transportation so that they msiy quickly move from one section 
to another as work presents itself. They also need a thoroughly 
organized bureau of labor which may properly route or direct 
them so that there may be less possible waste of time in secur- 
ing a new position when the last one has disappeared. 

Aside from these special classes I believe that farm laborers 
come under the groups indicated under "Farm Tenants," and 
they will find the suggestions under that head equally apply 
to their needs. 



PRESENT FACILITIES FOR LAND 

PURCHASE AND NEED OF 

LEGISLATION 



WHAT THE FARM MORTGAGE BANKERS 

OFFER 

F. W. Thompson 
President, the Farm Mortgage Bankers' Association 

In touching upon the subject of "What the Farm Mortgage 
Bankers Offer," I shall confine my remarks principally to the 
facilities now at hand and what the farm mortgage bankers 
have to suggest as a means of increasing these facilities for 
financing land mortgage loans for the American farmer. The 
farm mortgage banker includes country and city bankers, 
farm mortgage investment bankers and individuals and co- 
partnerships, who not only make farm loans for their own in- 
vestment, but who act as agents or brokers for the investment 
of funds foreign to the locality in which the loan is situated. 

These foreign investments have been computed to total two- 
fifths of a grand total of nearly $3,000,000,000 of the estimated 
total of farm mortgages in force in the United States at the 
present date. , It is unfortunate that accurate statistics are not 
available covering the aggregate total of farm mortgages in 
force, the rate of interest paid by the borrower and the dis- 
tribution of mortgage debt by states. The gatherers of in- 
formation forming the basis of the 1910 census obtained in- 
formation more or less accurate from owners of land actually 
occupying farms but only from such farm owners as would 
voluntarily give accurate answers to the census takers. 

No serious attempt has been made to obtain a survey of the 
public record showing farm mortgages in force because of the 
vast expense and labor necessarily involved in such an under- 
taking. Likewise it would require a personal interview with 
every farm mortgagor in the United States to obtain accurate 
information as to the rate of interest and commission paid by 
such borrowers. 

Mr. C. "W. Thompson of the agricultural department at 
Washington stated in a paper delivered at the recent conven- 
tion of Farm Mortgage Bankers held in St. Louis, that from 
his investigation, he found the average rate of interest with 
commission added paid by farm borrowers in the United States 
runs form 5^^ per cent in New York as the lowest to 10 per 



364 MARKETING AND FARM CREDITS 

cent in Montana. He mentions the Iowa rate as 5.9 per cent^ 
Missouri 6.8 per cent, Texas 9 per cent and Alabama 9^2 per 
cent. He makes the significant statement that the lowest rate, 
both as to rate and commission, is found in the East and ^lid- 
dle West. I might add, by way of supplement, that the low 
rate in the East results from the demand for truck stuff and 
highly specialized farm products and dairy output from large 
centers of population having large accumulations of wealth 
wath comparatively low interest rates prevailing, and in the 
Middle West because of the generally acknowledged superior- 
ity of both farms and farmers in this district and a consequent 
confidence of investors in the stability and desirability of both. 

Many contributing causes may be mentioned. for the com- 
paratively high rates reported by Mr. Thompson, but one or 
two may be mentioned as quite commonly understood. First, 
too much dependence upon a one-crop production and second 
the lack of uniformity both in value and productiveness of dif- 
ferent sections of our dilferent state units. When the Middle 
West put its main reliance upon wheat raising, the interest 
rate was high, ranging from 7 per cent to 12 per cent. When 
it changed to diversified farming, values began in increase and 
interest to decrease. High rates in the South can be attributed 
to the passion for raising cotton in a like manner. 

Illustrating my second contention, take the states like ^lis- 
souri, Kansas, Nebraska, North and South Dakota. Illinois, 
Minnesota, Indiana, Wisconsin, Ohio, Arkansas, Oklahoma, 
Texas and in fact almost every state in the Union, witli the 
exception of Iowa, which, as a state, is the most uniform of all, 
agriculturally speaking, and one will observe that each state 
has a considerable portion of comparatively inferior to bad 
land located within its borders. There are sections in all of 
these states as good as the best in Iowa, but in so far as the 
general public is concerned, the bad or inferior parts of each 
state contaminate the good in so far as rate is concerned, and, 
as a consequence, while the rate may be equitable to the hazard 
taken in the inferior section, it is not fair and is decidedly in- 
equitable to the good sections of the states so situated, as the 
average rate thereby is raised and causes confusion to the un- 
informed. 

Hostile Legislation Killed Its Own Objects 

Hostile legislation against foreign corporations, building a 
wall around state boundaries, have had a reversal of tlie ob- 



F. W. THOMPSON 365 

jects to be accomplished and have resulted uniformly in higher 
rates for money. The competition of highly organized cor- 
poration bonded indebtedness where, for the most part, the in- 
come tax is paid by such corporations has to a large extent up 
to the present time diminished the amount of money available 
for farm mortgage investment. The same can be said for mu- 
nicipal bonds, because of their freedom from income tax, and 
larger convertibility. 

Farm mortgage bankers have persistently battled against 
these obstacles and have been very largely responsible for the 
lowering of rates, and significantly may I state, that instead 
of being blamed for the high rate prevailing in some sections 
of the United States, they should be praised for their consistent 
endeavor to overcome handicaps imposed upon the farm mort- 
gage borrower in the good sections. These same bankers, de- 
fined in the forepart of this paper, have negotiated nearly 
$2,000,000,000 of the farm mortgages in force and nearly all of 
the $1,200,000,000 held by insurance companies, trust com- 
panies and savings banks of the United States, which latter 
volume of business represents the lowest average rate paid by 
farm borrowers in all sections of the United States. This may 
be a surprise to some people who have an erroneous idea that 
the farm mortgage banker was gouging the life out of the 
American farmer. 

If the volume of mortgages upon which a low rate of inter- 
est was charged could be set apart in comparison with the 
volume in force where high rates obtain, the apparent signifi- 
cance of the difference in rate herein mentioned would vanish 
in my judgment. 

Mortgagfes Often Indicate Growing Wealth 

There seems to be a general impression abroad that, in our 
country, the mortgage debt of the American farmer was forced 
upon him and that he is suffering a tremendous handicap by 
virtue of this indebtedness. If one would but stop to think he 
would soon come to the conclusion that this impression is wholly 
wrong and without foundation. Instead of being a burden it 
has been the chief cause of our wonderful agricultural de- 
velopment. The business of farm mortgage banking is quite 
the reverse of other banking activities in that to a very large 
extent the lender seeks the borrower to a much greater extent 
than in any other line of banking. If one would stop to con- 



366 MARKETING AND FARM CREDITS 

sider the relation of the difference in rate of interest paid un- 
der present conditions as compared with the fiat rate con- 
templated in present legislation (and I am now talking about 
the great bulk of mortgages, where after making liberal allow- 
ance we may assume that the rate paid by the borrower in the 
comparatively highly developed agricultural sections would 
not exceed 614 per cent it can readily be seen that the con- 
templated saving will not exceed 1^ per cent per annum, 5 
per cent being the contemplated flat rate. And by computing 
land values on the basis of $100 per acre, which is a fair aver- 
age price for lands in the better sections of the United States 
and assuming that these farms are encumbered to the extent 
of 50 per cent of their value, or at $50 per acre, the annual 
saving per acre would be exactly 621/2 cents. And in the sec- 
tions where higher rates prevail and where a comparatively 
lower volume of loans are in force, we will assume that the 
difference in saving would be 3 per cent per annum or $1.50 
per acre. When one contemplates that, aside from interest, 
the cost of crop production per acre for small grains, cotton, 
com and other food products run from $8 to $15 per acre, it 
would seem that more stress in this connection should be laid 
upon the waste and poor methods of present farming rather 
than to devote so much time and effort in attempting to reduce 
the rate of interest on money borrowed. 

Misunderstandings as to Variable Rates 

Considerable misunderstanding is afloat in the minds of pol- 
iticians, and real students of rural economics, with reference to 
the equity of a variable rate between different sections of our 
agricultural districts. For instance, they cannot or will not, 
I do not know which, discern why the interest rate and rate of 
commission should be less in Illinois and Iowa than in the Da- 
kotas or Montana or in other more remotely situated territories 
from money centers. 

May I offer this illustration from my experience : I have 
witnessed the average in unit loans in Iowa and Illinois grow 
from $3,000 to $8,000 in 10 years. The rate of commissions 
have decreased with the increase of the unit loaned. Ten 
years ago it cost the borrower from 3 per cent to 5 per cent 
commission above the basis rate spread over a period of 5 years, 
or % per cent to 1 per cent per annum, or a gross of from $90 
to $150 on a $3,000 average sized loan, and at present the gross 



F. W. THOMPSON 367 

commission rate now paid rarely exceeds 2 per cent and is 
somewhat lower in a great many cases or in amounts ranging 
from $80 to $160 for a loan of $8,000, covering a like period 
of time, or y^ per cent to % per cent per annum. It costs as 
many dollars to make a $1,000 loan as it does to make one for 
$10,000, and it is not reasonable to expect that the rate of com- 
mission will be as low in districts where loan units average 
$1,000 to $2,000, as in that district where the limit is 5 to 10 
times as great. 

The investor, in the last analysis establishes the basis rate, 
and the size of the loan unit, and the expense of making the 
loan and degree of profit charged constitute the rate of com- 
mission. 

There is some need of reform in the cost of appraisement. 
While it must be admitted that as the hazard increases the more 
frequent must be the inspection and investigation, and conse- 
quently a greater cost per unit, competition, also, has been re- 
sponsible for the payment of too large a compensation by loan 
companies to local agents for work done and responsibility as- 
sumed by these agents. Aside from this cost paid local agents 
it must also be admitted that it costs more to convince in- 
vestors of the desirability of loans arising in districts not quite 
as standard as in the agricultural district known as the corn 
belt. 

Added to the 2 items of initiating and selling expense, the 
farm mortgage banker must sustain an office expense, with 
highgrade, competent men in charge, to whom generous sal- 
aries must be paid. Their service to the investor and therefore 
to the borrower is practically to assume the care for all their 
negotiated loans, for the entire period the loans have to run, 
and to morally, if not legally, stand between the investor and 
any possible loss that might be sustained by virtue of forgery 
or defects in title. I think it perfectly justifiable that the bor- 
rower should pay a reasonable price for this service, because 
without it he could not be financed, except at a ruinous rate of 
interest. 

Need of a Valuation System 

If our politicians would devote half as much time and energy 
to a thorough and scientific study of this question instead of 
trying to write into our national statutes a law based on a 
practical exparte statement of grievances voiced by certain 
well meaning but misguided reformers, they would have found 



;^6S MARKETING AND FARM CREDITS 

It way of deliuiiiiT value, so that it would uot oost so tuuoh to 
^soertaiu it. 

lu their iuvestiiratioii of so-oalled European rural systems 
why do they uot report how value is deteruxiued in Germany 
and other countries in relation to farm laudf Are not ap- 
praisers appointed by the various subdivisions of states and 
luuuieipalities. empowered with authority to appraise property 
based upon income for the ditfereut classes of land for a driven 
period, and are they not empoweivd with judicial authority to 
demand and exact true statements of income from owners and 
operators of the various classes of agricultural land? 

These appraisements are made periodically but reirularly, 
and by computinir the average net income of the different 
classes of agricultural property a detinite. average rental value 
is thereby determined. This rental value when multiplied by 
a figure, the intei-est on which if computed at the current rate 
prevailing for the use of money or credit, would produce the 
average value of the given class of land. The sigtiiticant fea- 
ture of this appraisement is that the value determined theivby 
forms the basis of value upon which the land is taxed. 

Under our clumsy and inequitable taxation methods taxable 
valuations have but very little, if any. bearing on the real value 
of property listed for taxation. AVhile it is true that income 
alone is not the only governing factor of value it is the real 
factor and the only one needed in determining the taxable 
value. 

Given a true taxable valuation of our various farm properties 
in all of our states, their classification could be early deter- 
luined and it would be comparatively inexpensive to determine 
the degree of social and Sivie value and the moral hazard in- 
curred entering into the loanable value of farm land wherever 
situated. 

If this system of taxation could be put ii\to operation, it 
would force farmers, like other business men. to keep accurate 
records of their transactions, in order that they could give in- 
telligent answers to ot^cial appraisei's regarding the income 
value of their property. This semi-compulsory requirement 
regarding the keexnng of records of income and outgo would 
be as great a blessing to farmers as it is to individuals engaged 
in other business activities. A vast saving of commission and 
a lower rate of interest, a better credit and a much improved 
mental condition would be the compensation for what might 
seem a slight increase in the payment of taxes over what the 



F. W. THOMPSON 369 

farmer is now accustomed to pay. I am, however, a firm be- 
liever that under such a system of taxation the reduction in 
rate on the increased valuation of our farm lands would as a 
matter of fact not increase the amount of taxes paid, but actu- 
ally lower such amount, and the net result would save the bor- 
rowing farmer practically from I/2 per cent to 1 per cent per 
annum in reduced commissions on his mortgage loans, because 
it would eliminate the great bulk of the cost of repeated in- 
spections and simplify appraisement difficulties immensely. 

One-Crop Sections Must Change to Get Lower Interest Rates. 

Whatever system of farm mortgage banking is desired, the 
underlying principle must be financial trustworthiness on the 
part of farm borrowers and without a change in farming meth- 
ods in most of the so-called one-crop sections of the United States 
there can be no hope vouchsafed to farmers in these sections that 
interest rates will be much lower than now obtain. Any rural 
credit legislation should make borrowers participating under its 
provisions qualify to a simple standard of diversification of crop 
raising and livestock operations. 

Better and more efficient farming and a prohibition of soil 
robbing should be the slogan of all concerned in the handling of 
rural credits. 

Farm mortgage bankers have a sincere appreciation of the 
difficulties confronting the serious-minded people who are con- 
cerned Avith the future of the homeless tenant. A great many 
people think in average sized terms of acreage approximating 
160 acres in contemplating land that should be purchased by the 
homeless tenant. 

Tenancy is with us in all farming sections and is growing with 
alarming rapidity in our best developed sections. It is useless 
to think of tenants, without considerable money in hand, buying 
land in 160 acres or larger units when prices for land run from 
$75 to $250 per acre. 

Land owners cannot afford to take the hazard and the good 
tenant without cash who means to make a binding, earnest pay- 
ment likewise shrinks from such an undertaking. 

The social value of land in the better districts appeals just as 
much to the tenant as to the purchaser with means and this fact 
has no doubt been the means of keeping a multitude of tenants 
in the good districts from taking up cheap government land 
where social value is negligible. It is true that a good many 

24— M. F. C. 



370 MARKETING AND FARM CREDITS 

tenants have become land owners in good districts by tbe pay- 
ment of comparatively small earnest money payments and the 
thing that has saved a great many of them from failure has been 
the appreciation of land sale values, thus permitting the unsuc- 
cessful tiller of the soil to unload his burden at a higher price, 
thus saving the increase in selling price over the purchase price. 
Some of the wise tenants of this class have reinvested this money 
in smaller acreage units and have thereby increased their equity 
and where land sales are active and crops reasonably sure, this 
process has been repeated often enough to bring about a condition 
where the once homeless tenant finds himself the owner in fee 
simple of enough acreage, to put him in a position to mortgage 
this clear land and purchase additional acreage, with good pros- 
pects for his success in ultimately paying for such purchase of 
land out of the fruits thereof. This system works out fine as 
long as crops are good and when land is readily salable at an 
advanced price. 

Protracted periods of drouth and rainfall and other elemental 
disturbances amplified by crop pests, sickness in the family, etc., 
make the hazard great and no one should seriously think of pro- 
mulgating a system of rural credits based upon mortgages taken 
to finance such purchases and issue bonds against them, unless 
they were protected by a state or government guaranty, which 
guaranty in turn would have to have behind it a cash fund of 
sufficient magnitude to protect the investor in such a bond 
against defaults from whatever cause. The constitutionality of 
such a guaranty, however, is a grave question. 

Landless Man Must Be Able to Pay Half Down 

It seems, therefore, that until the homeless tenant acquires a 
fund large enough to pay or obtain credit to permit him to pay 
at least 50 per cent of the purchase price of land desired, he 
must be dismissed from participating in any scheme of long-term 
credit such as is now contemplated. As discouraging as this 
may seem there is a way out of the dilemma in my opinion, if we 
can get our homeless tenant to think in terms of smaller acreage 
and to think in terms of intensified instead of extensive farming. 
Instead of thinking of 160- to 320-acre farms, start on a 5 or 10- 
acre farm close enough to a fairly good town with good school 
anch church facilities to take care of the social needs of his 
family and if need be, rent a small cottage in the village and 
work the 5 or 10-acre tract for all it can produce. 



F. W. THOMPSON 371 

Eiglit here is where the building and loan association can do a 
service it does in building homes for salaried people living in 
small villages and towns, and if the man and his family have the 
righ kind of stuff in them they will soon have accumulated 
enough with what help the building and loan association can 
give them, and be glad of the chance, to erect a comfortable home 
and otherwise improve the property as the case may require. 
Small acreage property under a high state of cultivation is about 
as salable a proposition as can be found and the hazard of loss to 
both the owner and lender is reduced to a minimum. 

The earning capacity of 5 good acres of earth rightly handled 
and added to the earnings of a man willing to work will be suf- 
ficient to pay all carrying charges and to earn a surplus each 
year which will in an incredibly short time permit the owner to 
erect and maintain a home and to become the kind of a citizen 
every well-thinking, serious-minded person wants to be. 

Tenant farmers, like all beginners in other lines of business, 
must start at the bottom and work their way into larger things, 
by a system of close application to the work at hand with the 
tools they have, and by the exercise of thrift and economy fun- 
damental to all success in this world. 

Farm mortgage bankers are concerned principally in long-term 
mortgage credit. They have had years of experience ranging 
from 10 to 50 years in granting this kind of credit. There have 
been failures in this line of business just as in all other business 
ventures, but I think I am safe in saying that less money has 
been actually lost by farm mortgage bankers for their clients 
than through any other line of investment securities, excepting, 
possibly, municipal bonds supported by the taxing power of our 
various branches of government. None of the farm mortgage 
bankers have grown excessively rich out of this business. It has 
been profitable, but not excessively so. 

One of the features most prominently mentioned in proposed 
legislation is the predicating of mortgage loans as security for de- 
bentures issued in convenient form and maturity to attract the 
small investor. Most of the well-meaning enthusiasts glibly say 
that these bonds will find a ready market and that all that is 
needed is to have a sort of government paternalism cast over 
these bonds to make them eagerly sought after by the public. 

The experience of several companies doing this business has 
brought to light enough troubles and handicaps to cause me to 
say that this kind of financing should be handled with extreme 



372 MARKETING AND FARM CREDITS 

caution and that the supervisory control of the government 
should be worked to its highest efficiency before launching this 
craft out upon the investment sea. Contrary to past experiences, 
mortgages of the most superior merit regarding security and mor- 
al hazard should be the ones that should be trusteed for bond is- 
sues, rather than to countenance the practice of placing in the de- 
benture trust such mortgages as do not possess sufficient attract- 
iveness to sell, only to reappear again in the form of debenture 
bonds. 

Policy of Organized Farm Mortgage Bankers 

Knowing the business of farm mortgage banking thoroughly, 
both as to its strength and weakness and as to the desirability of 
handling and selling both mortgages and bonds, the farm mort- 
gage bankers of the United States in convention assembled at St. 
Louis in October, 1915, after giving months of study and seri- 
ous consideration regarding proposed legislation by the coming 
Congress adopted the following resolutions: 

This association was formed and exists to further any action 
which will facilitate rural credits, whether by legislation or in- 
dividual or organized private effort. We therefore favor rural 
credit legislation so far as it may, without violation of the 
constitutional and other vital principles of our form of gov- 
ernment, and without disregard of economic law, be effected 
to the common advantage of the borrowers and the lenders of 
the country. 

We believe it is a self-evident truth that credit has no ex- 
pression without ''financial trustworthiness." The borrower 
must have it and the lender must believe the borrower has it. 
A successful system of rural credits must recognize this truth, 
and the mutual interdependence of borrower and lender. 

The form of rural credit, however, which the members of the 
association are engaged in furnishing, is long time credit on 
approved land security. The association therefore confines its 
specific recommendations to the form of rural credits, although 
it recognizes that there are defects and deficiencies in the facili- 
ties open to the tenant without land, or the new comer — either 
immigrant or city-bred — ^who would go on the land. This as- 
sociation applauds the efforts to help both the nation and this 
type of individual by financing his establishment on the land, 
and would be pleased to render any assistance within its power 
to such a movement. 



F. W. THOMPSON 373 

In considering the phase of rural credit having to do with 
long term loans on the security of land the association accepts 
the following fundamental propositions: 

1. The object to be accomplished is to so mobilize this form 
of rural credit as to make it available to every land-owning 
farmer in the United States on terms as favorable as the market 
afford, consistent with the security offered. 

2. To accomplish this object it is neither necessary nor con- 
sistent with the principles on which this government is 
founded, to lend to farmers, as a class either the credit of the 
nation or its moneys, either directly by government loans, or 
indirectly by subsidies or guarantees. 

3. The object is, rather, attainable by removing those ob- 
stacles, legal and otherwise, which prevent the farmers' paper 
from reaching the investment market generally in such form, 
on such terms and from such a source as to make it at least as 
acceptable in the matter of assured security, convenience of 
handling and convertibility, as any other investment of equal 
intrinsic merit. 

This association believes this object, once attained, would 
provide for the farmer: 

1. Credit in quantity much greater than at present, and in 
quantity certainly sufficient for all legitimate purposes. 

2. Credit on a basis of intrinsic security, rather than of ex- 
trinsic factors such as the special laws of any given state, the 
distance of the security from the source of the funds, the terms 
as to maturity, etc., on which it was desired to borrow the 
money. This result would be gradual, requiring the amend- 
ment of the state laws as to titles, collections, taxation, etc., 
among other changes dependent on the citizens of the states, 
and not on anything the federal government can do by statute. 

3. Loans for long terms, as well as short terms, "Straight" 
or serial maturity, or amortized as to principal, the latter free 
from renewal worries or expense. 

4. As low rates of interest as the free play of supply and de- 
mand in the investment market affords, when not encumbered 
by the factors of lack of confidence, lack of convenient form, 
convertibility, and legality for certain funds, which factors now 
bar the farm mortgage from a very large market. We do not 
believe that lower rates can be obtained in any other way, and 
least by arbitrarily trying to fix by statute either interest rates 
or margin of profit or terms of negotiation. 



374 MARKETING AND FARM CREDITS 

To carry out the object outlined we believe that so far as 
possible present machinery should be utilized and supple- 
mented to that end. We favor the enactment of a federal law 
if constitutional, providing for the formation of national land 
mortgage banks with federal charters, subject to federal reg- 
ulation as to their methods and personnel, and federal super- 
vision of their affairs in much the same way as the national 
banks of the country and managed and supervised. We be 
lieve that these banks should have the dual privilege of: 

1. Negotiating, buying and selling individual farm mort- 
gages, thus making it possible to conduct the business without 
interruption as at present so far as the public demands. 

2. Issuing farm mortgage bonds against the collateral se- 
curity of farm mortgages made either for straight or amortized 
to give the special advantages of this form of security. 

We believe that the safety of the securities issued by such 
banks should be assured by very careful regulations, includ- 
ing provisions that the issuance of bonds and the power of sub- 
stitution of mortgages collateral thereto should be under the 
immediate control and supervision of the proper federal au- 
thorities, and] also that a graduated guarantee fund should be 
established out of earnings, in proper ratio to the outstanding 
bonds, this fund to be invested in securities at least equal in 
quality, and of a standard established by federal law, and to be 
held separate from the general assets of corporation. 

We believe that the minimum capital stock of such banks 
should not be less than $500,000 for the reason that less capital 
responsibility than that would fail to commend the degree of 
confidence necessary in the investor and that it is desirable to 
liave at least that amount of capital responsibility between the 
investor and loss, from the outset. 

We believe that the volume of the outstanding liabilities 
should not exceed 20 times the unimpaired capital and surplus 
of the bank. 

We believe that these banks should be free of limitation as 
to their territorial scope, either in securing mortgages or sell- 
ing mortgages and bonds, thus obtaining the advantage of un- 
restricted markets for their securities and sell to their cus- 
tomers securities on terms most acceptable in their market. 

We believe that the federal provisions for the conduct of 
such banks should include the qualifications for the mortgages 
^eligible for purchase or negotiation of those banks. 



F. W. THOMPSON 375 

We believe that where these mortgages are purchased from 
a negotiating agent and are not negotiated direct by the na- 
tional land mortgage bank, they should be purchased only 
from such individuals, partnerships or corporations as shall 
qualify under the provisions of the federal act and which shall 
be duly inspected and passed upon periodically by the proper 
federal authorities. We believe that this supervision would 
make it unnecessary to provide for the federal incorporation of 
small local mortgage negotiating concerns throughout the 
country, thus leaving any individual or group of individuals 
perfectly free to do business on the most economical plan, 
provided their securities measured up to the qualifications de- 
manded, and provided their affairs were regularly inspected 
by a federal officer. 

We advocate this system because we believe it would go far 
to obtain for the farmer the advantages above enumerated by 
giving to the investor the following advantages : 

1. The securities of such institutions would be before the 
people with the prestige atached to government institutions. 

2. The bonds of such banks would be made convertible by 
being standardized as to form and listed on the stock ex- 
changes. 

3. They could be issued in convenient denominations both 
large and small, making them available for purchase by small 
investors who now have practically no safe investment open to 
them except the savings banks ; 

4. They could be issued with both long and short maturities, 
thus reaching a large market, especially in the East which to- 
day confines its investments to securities of short maturities. 

5. They would offer the investor a security which would not 
involve the troublesome prepayment privileges now attaching 
to most individual farm mortgages. 

These and other advantages would open up a large market 
now unreached by the existing farm mortgage companies and 
this market could be decidedly amplified by federal provision ; 
including making them legal for the investment of postal savings. 

We believe it also likely that gradually it would be possible 
to secure the amendment of state laws in such a way as to 
make the securities of these banks legal for savings banks and 
trust funds now barred from farm mortgage investment by 
existing state laws, and to secure the modification of state laws 
as to taxation which now bar farm mortgages from several 
states. 



376 MARKETING AND FARM CREDITS 

Eesolved : That the Farm Mortgage Bankers' Assoeiatioii 
of America approves the foregoing general outline of recom- 
mendations concerning rural credit legislation which has been 
prepared by the board of govenioi's, and direct that such rec- 
ommendations be embraced in a formal presentation of the 
views of this association to the joint congressional committee 
on rural credits, with such minor moditications as the commit- 
tee appointed by the governoi*s may be necessary. 

Any rural credit legislation which fails to utUize present 
farm mortgage banking machinery and seeks to establish a 
wholly new order of negotiating or selling agencies would be 
highly undesirable. 

The experience of farm mortgage bankers acquired through 
many years of handling farm loans ought not to be cast aside 
without an effort to make the largest and fullest use of it. 



WHAT THE NATIONAL BANKS ARE DOING 

B. F. Harris 

President, First National Bank of Champaign. Illinois, and 

Chairman, Agricultural Committee. American Bankers' 

Association 

We have same 30.000 banks in the United States, 26.765 of 
which report their condition more or less in detail, their loans 
and discounts aggi*egatiug 151 4 millions; bonds, stocks, etc., 
o^- millions; their total resources amomiting to more than 
#2l00O.0O0.0OO. 

Seven thousand, live hitudred and twenty-live of these are 
national banks with total resources of $9,150,117,780. and l-i.512 
are state banks of the commercial class or national t}-pe with re- 
sources of $4,353,663,536. 

There are, m addition, some 3.664 mutual and stock savings 
banks and loan and trust companies under state supervisiou that 
have resources of almost $11,000,000,000. 

Only about 34 per cent of the almost 25 billions of dollai"s. 
total resources of the 26.765 reporting banks, are held by national 
banks. — in other words probably 65 per cent reporting bank re- 
sources are in state institutions. 

As between the 7,525 national and 14.512 comuteivial state 
banks, the state banks hold about 32 per cent of their joint re- 



B. F. HARRIS 377 

sources, but if we add the 3,664 savings, and loan and trust com- 
panies under state charter, we find the 18,176 state supervised 
banks have over 15 billions ot* assets, or more than 62 per cent 
of the joint resources of state and national banks. 

Something over 258 millions of the 14,512 commercial state 
bank assets, or 9 per cent of their loans and discounts, are in 
farm mortgages, or a total of 18 V2 per cent in all kinds of real 
estate loans. 

If we consider all the 18,176 state supervised banks we find 
that 437 millions, or 5 per cent of their loans and discounts are 
in farm mortgages, or more than a billion and a half dollars or 
18 per cent of their loans and discounts in various kinds of real 
estate loans. 

Until the passage of the Federal Reserve Act, national banks 
were not permitted under the law to loan money on real estate, 
and only to take real estate for building purposes, or as a last 
resort to protect weak loans. 

At the time of the adoption of the Federal Reserve Act, only 
about 75 millions of national bank resources were concerned with 
real estate, or less than 5 per cent of the amount of state bank 
real estate loans, and very little of this was farm loans. 

Data as to the national bank holdings in farm mortgage loans 
under the Federal Reserve Act are not available at this time. 

It is interesting to note just here that we have located 437 mil- 
lions of farm loans, in the banks of the country, and consider- 
ably more than 500 millions Avith our 24 largest life insurance 
companies. 

There is a feature of the bankers' work, however, both na- 
tional and state, on which M^e cannot get accurate data, and yet 
it is the very largest service he does in the farm mortgage line. 

From law and necessity the banker cannot tie up, or for any 
long period, any large proportion of his assets in farm mortgage 
or other long-time securities. He is, however, constantly buying 
and turning over farm mortgages to his investing customers and 
outsiders. 

He may have sold and there may constantly be held locally a 
sum in farm mortgages equaling or several times exceeding his 
bank's farm mortgage holdings — not to mention the mortgages 
for which he has found a foreign market. 

If the banks own upwards of 500 millions in farm mortgages, 
they have at least supplied and kept local capital loaded up Avith 
several times this amount. 



378 MARKETING AND FARM CREDITS 

To sum up this data shows that of 18,176 state supervised 
banks having resources of over 15 billions of dollars — the 3,664 
savings and trust companies having 11 millions of the 15 billions 
of assets have a billion of real estate loans, while the 14,512 com- 
mercial banks having less than 4i/^ millions of the assets, have 
■over a half million in real estate loans, almost half of this, or 59 
per cent of all state bank holdings, in farm loans. 

In other words, the commercial state banks have 18l^ per cent 
of their loans and discounts in real estate, and the state savings 
and trust companies have less than 10 per cent in this class of 
loans. 

This rather revises the theory that commercial banks should 
handle less and investment banks more so-called long time loans. 

It seems to me that from all this maze of figures 2 facts stand 
out clearly: 

First: The rank and file of commercial state banks have car- 
ried the bank load of farm mortgages, and that the national 
banks may easily and relatively carry an equal load, more partic- 
ularly now that they have federal reserve banks back of them. 
The figures above and experience time and again has demon- 
strated that so-called "bonds" — local public service, corpora- 
tion debenture, or ' ' blue sky ' ' — whatever they may be and which 
a national bank may pile up ad infinitum, are not so liquid, or 
<;onvertible, or so safe as good farm mortgages. On the other 
hand, they are in many instances more salable and convertible 
than such of the so-called short-time paper county banks hold — 
and have to hold and renew as a matter of business. 

Second: That the great success and vast number of state 
banks — more than 21^2 to 1 national, and 62 per cent greater ag- 
gregate resources — and their success with farm mortgages, proves 
that the states can solve their own rural credit problems as well 
•or better than can the federal government. 

It is accepted doctrine that the federal government should not 
undertake to do what the state may as well or better do for itself. 
At this stage of the development, the federal government's part 
if any in rural credit legislation is very slight and only of a gen- 
eral character — with the chances that we would be as well or bet- 
ter off with none at all from Congress, as what it is likely to give 
us. 

Now a national bank is supposed to be a commercial bank 
in a liquid condition. And yet it is a principle of every coun- 
try banker that he may have a note and has a great volume of 



B. F. HARRIS 379 

notes of bankers that run 90 days or 4 months or 6 months, 
and in many instances those farmers, although the note is ab- 
solutely good, no question about it, it isn't convenient for those 
farmers to pay that loan and that loan is not liquidated be- 
cause if the bank forced the payment of the loan it would in- 
convenience the farmer tremendously and when that passed 
over that farmer would never come back to that bank and 
do any business. And so those notes that are supposed to 
be liquidated, really are not liquidated. And during the 
last panic we found, and it was the experience of bankers all 
over the country, who had first-class mortgages, that those 
first-class mortgages were really the last liquidated of any 
they had and the first liquidated of any they had was their re- 
serve assets here in Chicago banks and New York banks and 
elsewhere. 

I think we are apt to have, quite apt to have federal legisla- 
tion on the subject. The politicians have said so. The people 
may find some reason that suits them whereby we should have 
it. But I believe that the chances are that we would be as well 
or better off with none at all from Congress unless it would 
be some enabling act, and some of the enabling acts that some 
of us really want. 

When you go into the mortgage side of the question, where 
it becomes even more a local question because every one of the 
48 states has so many different conditions with reference to 
mortgages and examinations and the times of foreclosure and 
a thousand other things that are tremendously complicated, it 
doesn't seem possible to me that the federal government can 
pass any act that will cover 48 states and give all those 48 
states the opportunities they ought to have. A general bill 
will give one section too much advantage and the other section 
not as much advantage as it might have. 



380 MARKETING AND FARM CREDITS 



A PLAN FOR A COOPERATIVE SYSTEM OF 
RURAL CREDITS 

Robert D. Kent 
President, Merchants' Bank of Passaic, New Jersey 

The subject of rural credits has receutly received and will 
continue to receive much attention, and undoubtedly Congress 
will in the near future legislate upon it. The increasingly 
seientitic nature of agricultural work, the apparatus required 
on the modern farm, and the gradual disappearance of free or 
low priced land have combined in effecting a dependence of 
the farmer upon the banker for financial aid. This reliance 
upon a class, whose interests are frequently regarded as alien 
to farm development, has had only mildly satisfactory results 
at the best, and in some cases has given rise to conditions which 
are well nigh intolerable. 

A friend of mine who isi a literary person of keen observa- 
tional poAvers upon reading a preliminary draft of this paper 
told me the following true story. 

"For many years I was in the habit of visiting a place in 
AVestern New York which is the center of Avhat is probably 
the richest farming district in the state. 

"The village, which we will call Sparta, (though that is not 
its name) is rather remarkable for the culture and intelligence 
of its so-called "society people" combined with a cosmopolitan 
spirit somewhat rai'e in a village so far from the seats of the 
mighty. All sorts of hospitable affairs were going on con- 
stantly, winter aiul summer, and evening card parties were 
exceedingly popular. 

"'Sparta is a place of active business interests. There is a 
flourishing national bank. The president of the bank, John 
Ballin, whicli of course is not his name, was always in demand 
in the social life of the place. Tall, dark, handsome, meny, 
engaging, a charming host, an appreciative guest, he was wel- 
comed everywhere. In business circles he was feared and 
hated. The name given him there was the 'spider.' I should 
add that John Ballin was one of the most generous supporters 
of the little 'Church of the Savior' the church to whioh 'our 
set' belonged. 



ROBERT D. KENT 381 

"In my drives about the beautiful country sometimes far 
afield, I would often come across stately farmhouses, in the midst 
of prosperous acres. To my inquiry, 'Who lives here?' the 
answer would frequently, oh, very frequently be : 'It 's one of the 
Ballin farms, rented. ' I supposed that the bank took this mode 
of investing its money until I was undeceived. 

By degrees I discovered that this was the Ballin way. A 
farmer in difficulties, the kindest reception at the bank, a mort- 
gage raised, perhaps 2, great leniency promised if the interest 
was paid ; then, at the legal moment, foreclosure. Gain on one 
side, ruin on the other. All this was well known. Ballin 's plots 
were understood throughout the entire county, but the flies con- 
tinued to seek the friendly web, and the spider continued to fat- 
ten. And the bank president continued to be the welcome giiest. 
And, continued my friend, "Under the system of rural credits, 
as you have explained it to me, suoh villany as I have de- 
scribed would be impossible, and you have clearly shown why. ' ' 

The facts mentioned in this instance are rather exceptional 
than typical, but they represent a potential evil which may not 
be overlooked. The need of remedial measures is now generally 
recognized, not only as safeguards against injustice, but on ac- 
count of constructive benefits the need of which is plainly fore- 
seen. It is then, very timely to discuss the nature of such meas- 
ures. 

Drawing Upon Experience of Egypt 

The most important consideration is one of broad policy; 
whether it should result in a system of private organizations, or 
in a structure of government machinery. Let me quote a foreign 
authority, Mr, C. Scott-Dalgleisch, formerly general manager of 
the Agricultural Bank of Egypt, in a communication in the New 
York Times of February 28, 1915, he says: 

' ' I am convinced that private initiative must go a long way 
to determine the best method of handling the business of rural 
credits before the question of legislation arises at all. As the 
music is the accompaniment to the voice in a song, so should 
the music of legislation merely accompany and modulate the 
voice of performance. In no country has any real progress 
been made where intelligent and bold private initiative has 
not preceded any efforts to help by legislation. 
"Secondly, centralization is necessary adequately to valorize 
the assets of farm credit. No system of small scattered units 



382 MARKETING AND FARM CREDITS 

can succeed unless they are bound together in such a way as 
to make them E Plurihus Vni(,m. 

' ' The Fletcher proposals and the McCumber proposals are 
as far as the poles asunder, the one looking to the creation of a 
new system of dispersed independent machinery, and the 
other to the establishment of a central governmental engine. 

''Legislation may and will follow to smooth out the rough 
places and to remove the obstacles that will arise in certain 
places, but much may and should be done before that comes. 
What is wanted is a Eaiffeisen or Schultze-Delitzsche to do 
something, and then the legislators may find useful work in 
helping the pioneer to round out his work bj^ making it pos- 
sible for all sections of the country to benefit alike. ' ' 
It must be understood that this paper is conceived in very much 
the spirit of these remarks. Its suggestions are made in the feel- 
ing that governmental operation of business institutions is unde- 
sirable, and very largely unnecessary. When such participation 
by the government becomes mandatory, by all means let us face 
the fact and insist upon thoroughness, but until that time comes 
let us be content with regulation, and but little of that, in short, 
as much as necessary, but as little as possible. Moreover, it 
would be a shame to deprive the farmers of the United States of 
the tonic effect of working out their own financial salvation. 

Simple, Self-Capitalized Rural Credits System Needed 

For the principles of the solution are simple enough, it is only 
the details which must be carefully worked out. This paper is 
concerned only with a discussion of these principles and some 
suggestions bom of practical experience which should be of value 
in planning the details. Beyond this, success depends on the 
efforts of intelligent legislators. What we hope they will ac- 
complish is the adoption of legislation effecting the creation of a 
uniform, simple, and self-capitalized system of rural credits. In 
constructing it they must provide for flexibility, and above all 
they should give it the character of a popular (in contradiction 
to a bureaucratic) system. In framing legislation for rural cred- 
its it must be done in a realizing sense of the normal relations 
that shall exist between the borrower and the local associations. 
The system should be adapted to the conditions which will be met. 
These should not be strained, in order to carry out the require- 
ments of a law that was imperfectly framed to meet circumstances 
not fully understood. 



ROBERT D. KENT 383 

Lest it should be thought that this is requiring too perfect a 
labor it is reassuring to look at an institution which has for some^ 
decades shown these qualities in widespread operations. I refer 
to building and loan associations, and offer their type as a pat- 
tern, which, with alterations in 2 or 3 particulars, would serve 
most aptly for rural credit associations. 

Building and loan associations have long been recognized by 
persons who have given careful thought to the subject as con- 
taining the principles best fitted to build the foundation of a 
structure of rural credits. As I am somewhat familiar with 
these organizations I offer my observations as a contribution to 
the economy of rural credits. 

The general plan of building and loan associations, at least in 
New Jersey and Pennsylvania, where I am most conversant with 
their methods, is essentially cooperative. The shareholders pay 
monthly dues and the amount accumulated becomes available to 
lend at interest of 6 per cent. The shares appreciate in value 
from monthly payments, compounding of interest, fines for tardy 
payments, and premiums on loans. If a member pays $10 a 
month for 11 or 12 years his investment of approximately $1,380 
will amount to $2,000 at the end of the period when his shares 
mature. Only members may borrow ; if they wish to borrow more 
than the amount which they have already paid in dues, mort- 
gages are taken as security. Frequently there are several appli- 
cants for loans, and the association is enabled to exact a premium 
for its money. The extremely valuable features which distin- 
guish these associations are compulsory prompt payment, economi- 
cal operation, and intimate personal knowledge of prospective 
securities and borrowers. 

In properly managed associations under good conditions non- 
borrowers should net say 7i^ on their investment and borrowers, 
by making allowance for the earnings on their shares should find 
that the cost for their mortgage loans was about 5 per cent. 

Building and Loan Association Plan Can Be Adopted 

The structure of these associations can be advantageously 
taken over into farm loan associations. Each agricultural com- 
munity should organize into an association all of the farmers 
and others who desired to share in the prospective benefits, at 
the rate of $1 a month per share. If 500 shares were subscribed, 
the end of the third month would see a fund of $1,500 available 
for making temporary loans to such members as might need to 



384 MARKETING AND FARM CREDITS 

borrow. After the lapse of a year the accumulated dues, inter- 
est, and repayments of sihort loans would amount to enough to 
warrant the association in embarking in the farm mortgage 
iDusiness. 

Security for short, loans might be chattel mortgages on cattle, 
and under certain conditions, liens on growing crops. A friend 
of mine who had been cashier in a Nebraska bank once told me 
that in an experience of 20 years his bank had never lost a dol- 
lar on loans secured by cattle, but growing crops had proved un- 
satisfactory as security, since about 1 crop out of 4 was a fail- 
ure. The 3 good crops might each be worth tenfold the loan 
for which they were pledged, but this, of course would not com- 
pensate the bank for the 1 poor crop if that had to be foreclosed. 

Short term loans could be frequently made with safety upon 
the note of the borrower with one or two endorsements. The 
longer term loans would be secured by mortgages in the usual 
manner. 

Three qualities of building and loan associations would un- 
doubtedly be found in rural credit associations organized on the 
«ame plan. The operating expenses would be correspondingly low 
There would be a continuous compulsion upon the farmer mem- 
bers to meet their obligations of monthly payments. The di- 
rectors being usually the largest stockholders and therefore most 
anxious concerning the prosperity of the association, would pos- 
sess intimate acquaintance not only with the men with whom 
they dealt, but with the properties which figured in their 
transactions. 

How a Rural Credit Association Would Operate. 

The operation of a rural credit association organized in this 
manner can be best illustrated by the experience of a typical 
member. A farmer desiring to borrow $2,000 would subscribe 
for 10 shares of stock in the series issued that year. His ex- 
penses would be $10 a month for dues and $10 a month for inter- 
est at 6 per cent. At the end of about 11^ years he will have 
liquidated his indebtedness and cleared the last portion of his se- 
curity, which has included property mortgaged to the associa- 
tion, and his own shares in the association pledged back to it. 
When the value of his shares has become $200 each, his assets 
have equalled his liabilities and the mortgage has been cancelled. 

Here we have our farmer furnished with the strongest incen- 
tive to keep up his monthly payments, in fact he is practically 



ROBERT D. KENT 385 

compelled to do so. The thrift resulting from this fact has been 
abundantly demonstrated in building and loan associations, and 
corresponding benefits derived from it in rural credit associa- 
tions can hardly be overestimated. Indeed, it is generally rec- 
ognized that a membership in a building and loan association 
has been more conducive to thrift than a savings bank account. 
Furthermore, if other members have been tardy in making pay- 
ments our farmer enjoys the accretion of a portion of their fines 
to the value of his shares. Even his own payment of compound 
interest is returned to him in the increased value of his holding. 
The safety of his funds is remarkably well assured, and is always 
under his observation. The expense of administration, besides 
being low, is at all times a matter of common knowledge. 

He might be in a position to retire his obligations before ma- 
turity, in which case he should be allowed to do so and his stock 
relieved of the lien so that he could continue his membership un- 
til maturity of his shares. Then he would receive the full value 
of these shares, the same as a non-borrower. But should he wish 
to settle in fiill with the association, or should a non-borrower 
wish to withdraw from membership in the association, he should 
be credited with the withdrawal value of his shares at the time 
of the resignation. This withdrawal value would be somewhat 
less than full ascertained value, so that a withdrawing member 
would be in effect slightly penalized for not being willing to 
continue, the amount of the penalty being applied to increase 
by a trifle the value of the shares remaining. 

How to Care for Large Disbursements 

If large disbursements should be called for at the maturity of 
any series of shares, the natural method of making provision to 
pay them would be to hoard the income of the association for a 
sufficient period previous in order to raise a fund of proper di- 
mensions. This, Jiowever, would cripple the lending power of 
the association and result in lost motion, which is quite as ex- 
pensive in finance, as in engineering. To overcome this diffi- 
culty, payments to non-borrowers should be made in certificates 
of indebtedness. Such certificates are readily accepted by share- 
holders of building associations. They bear legal interest, are 
considered a prime investment, and are usually satisfactory to 
local banks as collateral for loans. A proportion (usually one- 
half) of the current income of the rural credit association should 
be set aside for the payment of these certificates. 

25— M. F. c. 



386 MARKETING AND FARM CREDITS 

In order that withdrawals by non-borrowers may not em- 
barrass the operations of the association, it should be stipulated 
in the by-laws that not more than a certain percentage, say 50, 
of the current income should be devoted to the payment of with- 
drawals in cash, and in payment of certificates of indebtedness. 
Indeed, the maximum proportion to be devoted to each might 
weU be specified. 

It might happen, however, that a member could not pay his 
indebtedness to the association within the time required for the 
maturity of his shares. In such a ease there should be a consti- 
tutional provision becoming operative upon action of the direc- 
tors, allowing the delinquent member to pay less than the normal 
amount required by him in cash, and the remainder, in notes 
maturing when his membership matures. At that time a new 
mortgage for the total amount of the notes should begin to op- 
erate. The least amount accepted in cash, however, should be 
enough to cover the interest and leave a little over upon the prin- 
cipal of his indebtedness. 

One other contingency whicji should be provided for is the 
theoretical situation in which the funds of the association ex- 
ceed the amount required by borrowers. Indeed, this is some- 
times encountered in practice, and can be met by retiring a nec- 
essary number of shares on which no loans had been made, to be 
chosen by lot and canceled at their full value without penalty. 

These principles, then, are the structure indicated in the cre- 
ation and operation of rural credit associations designed to en- 
able fanners to finance tJvemselves. Flexibility, economy, per- 
sonal knowledge of securities, and utter absence of artificial in- 
terest rates are the factors which made for success. There re- 
mains to be considered the means of making such associations 
uniform and cooperative the country over. 

Farming District Loan Association 

To this end, any number of local associations not less than 10, 
and not exceeding 30, should form a district association. This 
latter organization should be governed by a board of directors 
consisting of 1 representative from each local association in 
the district — an arrangement affording protection against any 
particular local body which was not conservative in its methods. 

The district association would furnish the united guarantee 
of all its constituent locals to a national association, much as the 
currency associations guaranteed their members (national 



ROBERT D. KENT 387 

banks) under the Aldrich-Vreeland law. The district associa- 
tion should be capitalized by the local associations, which should 
devote say 1-10 of their income to this purpose. 

Organzing a National Body- 
All of the district associations should be federated into a na- 
tional association, mentioned above. This body should receive 
from its constituent district associations, mortgages previously 
obtained from the locals, such obligations being passed up from 
time to time as requirements dictated. These mortgages trans- 
mitted to the national association should bear the guarantee of 
their originating district associations. The national association, 
thus fortified, could sell its securities to the public as long time 
obligations. The proceeds of these sales should be turned over 
to the district associations in return for the mortgages supplied. 
The capital of the national association need not be great, it 
could best be furnished by the district associations to an amount 
sufficient to defray running expenses, and allow for advances, 
pending the sale of obligations. The national governing board 
might well consist of the comptroller of the currency, the sec- 
retaries of the treasury and agriculture, 4 men elected by the 
district associations from among their boards of directors, and 
4 to be appointed by the president of the United States. The 
whole system should be under the supervision of a federal of- 
ficial, who should bear somewhat the same relation to the vari- 
ous associations that is borne by the comptroller of the cur- 
rency to national banks. With an organization thus consti- 
tuted there would be no difficulty in selling its obligations at 
a very moderate rate of interest, particularly after the public 
had come to know the standing of the National Eural Credit 
Association. 

Centralized Control an Essential 

Only by such a centralization of control could all the po- 
tential benefits of the system be realized. The advantages to 
be derived from it are obvious. The securities offered to the 
public would thus, on account of a reputation for solidity, and 
an insurance by diversified territory against crop failure, meet 
with a ready market which would hardly be available through 
any other means. A rural credit association in Alabama would 
have the same structure and methods as another in Massa- 
chusetts, and one in California would be amenable to laws 



388 MARKETING AND FARM CREDITS 

worded similarly to those which regulated associations in Ohio ; 
a rural credit security in Michigan would represent substan- 
tially the same thing as a security in Texas. In short, the in- 
stitution would be standardized. The value of personal knowl- 
edge of properties and persons would be general throughout 
the country. 

It should be arranged through a government franchise tax, 
or in some other manner, that the federal government should 
not be put to any expense in carrying out its part in super^'is- 
ing and regulating the system. On the other hand in my judg- 
ment the government should not profit in the matter at the ex- 
pense of the stockholder, but should be satisfied with reim- 
J)ursement for all the expenses incurred. This policy however 
anight with propriety be modified to the extent of collecting 
Tthe usual income from the corporation tax. 

li, however, it should be though that the government should 
^receive a profit from the operation of the system, there is one 
"W^ay in which this could be done without decreasing the earn- 
iQgs of the shareholders. That way is for the federal govern- 
naent to guarantee the obligations of the national association, 
thus decreasing the rate of interest which would have to be 
paid on them, by removing the last vestige of insecurity^ a 
^measure which would net the government a sum, representing 
tthe difference in interest charges, which it would be eminently 
ifair and proper to receive. 

Sn conclusion allow me to say that in carrying out the prin- 
-ciples advocated we should not be taking a step in the dark. 
'These principles have stood the test of practical experience. 
Under the operations of independent building and loan asso- 
' ciations tens of thousands, yes, hundreds of thousands of homes 
'have been built. The federation of rural credits associations 
■proposed, is on the lines of the Aldrich-Vreeland Law, under 
^which over $380,000,000 of currency was issued by the fed- 
'-erated national banks in 1914. This eased the shock to the 
monetary machinery of the country, resulting from the Euro- 
pean war, much as a disabled elevator, plunging, down a shaft 
would be gently stopped by a properly installed air cushion. 



JAMES E. FERGUSON 389 



HOW OUTSIDE CAPITAL MIGHT AID IN 

TURNING LANDLESS MEN OF TEXAS 

INTO HOME-OWNING FARMERS 

James E. Ferguson 
Governor of the State of Texas 

You know, down in Texas, we are far removed and have been 
for many years, from the outside sight of the world and we have 
been content to be the center of interest in the world's activities 
in our own way. Our vision has been somewhat prescribed and 
restricted to the questions such as have been discussed at this 
meeting heretofore. That is, I might say, up to 10 or 15 or 20 
years ago these matters have not been considered with the seri- 
ousness that they ought to have been considered by our people 
considering the great advantages that we have to develop. 

When I look around this audience, and when the secretary tells 
me that we ,have 46 states represented at this meeting, I am re- 
minded of a story which is quite current down in Texas about a 
man who made a speech at one of our farmers' meetings some 
15 or 20 years ago ; and he undertook to tell the farmers what 
was the matter with their condition. In the course of his re- 
marks he said, **Now, my farming friends, what is the matter 
with you is that you don 't live at home, you haven 't practiced and 
learned the fruits of conserving and utilizing your own re- 
sources. The great trouble is that you have contented yourselves 
with continually buying something from somebody else and sell- 
ing nothing to anybody." He said, "Now, to illustrate what I 
am talking about, I want to call your attention to the fact that 
when you awake in the morning it is to the alarm of a Connec- 
ticut clock. You get up and button your Chicago suspenders 
on to your Detroit overalls. You go out and wash your face 
in the morning in a Toledo M^ash pan with Cincinnati soap. 
You sit down to the table and you eat breakfast from a table 
made in Grand Rapids, Michigan. And for your breakfast you 
eat Chicago meat, Tenessee flour cooked on a St. Louis stove. 
You got out and put a New York bridle on a Kentucky mule fed 
on Iowa corn. And all day you plow a farm covered with a 
Massachusetts mortgage with a plow made in Chattanooga, Ten- 



390 MARKETING AND FARM CREDITS 

nessee, and when your day's work is over and you go home at 
night you read a bible printed in Boston, you read a prayer writ- 
ten in Jerusalem and you crawl under a blanket manufactured in 
the state of New Jersey to be kept awake all night by a damn dog 
the only home product, on the farm." (laughter). 

So, my friends, we have begun to realize that we have to pre- 
vent a continuation of that and it is by the discussion and attend- 
ing the farm credit meetings and market associations that we in 
Texas are going to get some more out of this movement than you. 

But I have been asked to address myself to the question of the 
need of outside capital to aid the homeless man of Texas to be- 
come a home owner. Perhaps it is only the native that is in- 
terested in the history of Texas. The valor of the heroes that 
gave her her independence, the struggles of her pioneers to 
blaze the way to her future glory are perhaps not matters of even 
passing interest to the non-resident. Suf&ce to say that upon 
the altar, upon the foundation laid by a noble industry, there is 
in Texas today a government where life and property are safe 
from confiscation and the oppressive burden of government. 
Texas is an empire in area of natural resources. No greater 
evidence can be produced of the resources of any country than 
we showing the number of people a country can support. 

Natural Resources of Lone Star State 

It has been said that "progress and civilization begins and 
ends with the plow." Texas has 4i,'2 million people at present 
and can support by agriculture alone 20 million people. Let 
me see if I can prove it. Germany has a population of 60 mil- 
lion people and provides for her population and aside from war 
periods her people are comfortably cared for, Germany has an 
area of 209 square miles. Texas has an area of 265,000 
square miles, or more than one-fifth larger than Germany, 
Germany has a rainfall ranging from 16 inches, the lowest, to 
34 inches, the highest, or an average rainfall of 25 inches. 
Texas ihas a rainfall ranging from 10 inches, the lowest, to 
50 inches, the highest, or an average rainfall of 30 inches, 
or one-fifth more than Germany, Germany has 292 people to 
the square mile, Texas has 17 people to the square mile and 
you will be perhaps astonished when I tell you that reliable in- 
formation discloses the fact that only 48 per cent of Germany 
is tilled or can be tilled in crops, the remaining 52 per cent is in 



JAMES E. FERGUSON 391 

pasture and vineyards, wjiile 60 per cent of Texas is tilled and 
said to be tilled and the balance is fine timber and pasture lands. 

It is true that Germany has a great manufacturing population, 
but agriculture is and has been the principal foundation of ]iev 
activity; but what Germany has done in a manufacturing way, 
Texas can and will do when she has farmed her untilled area 
with an increased citizenship. So it must be apparent to even 
the most skeptical that if Texas exceeds Germany by one-fifth 
in area, in rainfall and in tillable area, it is apparent that she 
can support as many people as Germany. And yet for the sake 
of conservatism I ,have divided my figures by 3 and say that 
Texas will some day have and support 20 million population. 

Again, to prove this, take any % states in the Union whose 
combined area equals that of Texas and whose population is 20 
million and you will find that the fertility of no 4 states, and the 
climate can be compared with the fertility and the climate of 
Texas. Yet Texas has 230,000 tenant farmers, an increase of 
55,000 since 1900. 

There is no greater question that concerns the statesmen of this 
age than that of bringing into absolute ownership the man who 
will in person cultivate the soil. This condition means, my 
friends, that the country must be in possession of the small home 
owner and calls for the most serious consideration of any govern- 
mental policy which will bring about that result. It even calls 
for the most progressive legislation that may be enacted under 
the public welfare powers of the government. The philan- 
thropist can find no greater field to benefit mankind than to lend, 
not donate his money, to a worthy and ambitious citizen strug- 
gling to feed and clothe his family, educate his children and own 
his home. As I have shown that Texas can support 15 million 
more people than she has, and as the federal census shows that 
there are 2^/2 million tenant farmers in the United States, the 
solving of the Texas condition becomes almost one of national 
concern. With the proper financial assistance, Texas can fur- 
nish a farm of 50 acres to every tenant farmer in the United 
States. . 

Outside Capital a Great Need 

And that is the question that we in Texas are confronted with 
today, through no want of shift or energy, but largely from the 
fact that we are a comparatively new people. Large financial 
reserves have not been accumulated in Texas ; and consequently, 



392 MARKETING AND FARM CREDITS 

the assistance which the tenant farmer needs in the way of long 
time loans at reasonable rates of interest will have to he ob- 
tained from outside sources. And so, we, the people of Texas, 
have committed ourselves to bringing about this result. We 
have committed ourselves to the task of passing legislation that 
will hold out every inducement to the foreign investor. Texas 
is duly grateful for the help and the great philanthropy that has 
been extended to us by the outside investor. We have learned 
many and valuable lessons by that relation, but up to the present 
time the development of our untilled area, now one 100 million 
acres, has been greatly restricted by 2 causes: first the want of 
enough outside capital; and second the restricted terms upon 
which the money was loaned and is loaned. 

Under the present rule in Texas the farmer is required to pay 
down at least one-half of the value of his farm before he can ob- 
tain the loan from outside sources and his interest rate is rarely 
under 7 per cent. As the gentleman told you, the average 
rate is 9 per cent. I am not complaining, understand me, 
friends, but I am only telling you the conditions with which we 
have to deal and to show you the task that is before us. 

So, we in Texas began to realize that having 100 million acres 
of untilled land susceptible to intense cultivation, that we must 
turn our attention to bringing under the plow our vast area of 
unimproved land and we are inviting the people in Texas to 
help us settle these small homes by money being loaned to the 
small owners. 

Put Tenants Upon Unoccupied Land 

Again, as has been stated here today, to the tenant farmer 
where land values are high, where lands are restricted to the im- 
proved districts, the tenant farmer under those conditions can 
never own a home, the door is eternally closed to him. And so it 
is in your state, every state in this Union. And if we are to 
have the homeless man to realize his hopes we must turn our at- 
tention to putting him on the unoccupied land. Land sold at 
$100 an acre to the tenant farmer even at interest rates of 5 per 
cent does not help, because it in reality represents a rent of 5 dol- 
lars an acre plus taxes and maintenance. The average farmer 
cannot pay it, and consequently he must look to some other field 
to get a home ; and that is what we want in Texas. Understand, 
we have got no fake securities to sell you. I would rather today 
have a loan ia East or West Texas of $5 an acre on land wort a 



JAMES E. FERGUSON 393 

$10 an acre than have a loan of $50 an acre on land supposed to 
be worth $100 an acre. The cheaper land has the greatest future 
before it and will increase in value quicker. And that is the 
problem that confronts the people of Texas. 

But, my friends, speaking on a broader sense, the problems of 
Texas are in reality only a part of a great national problem. 
For 50 years in this country those laying claim to the names of 
statesmen talked about the sins and virtues of the tariff. Every 
few years brings a new crop of "trust busting" politicians who 
ride into office on that old issue. Today we have many would-be 
statesmen, who, seeking to make themselves available candidates 
for president, are prattling about the virtues of national prohibi- 
tion and they tell us that that great reform will banish all the 
troubles of the nation. But, in my opinion, my friends, these 
questions, important in some degrees though they tnay he, a/re 
nothing compared to the great question of a governmental land 
policy to he adopted in the United States. 

Why the Growth of Unrest? 

In the beginning, let me emphasize my allegiance to the 
sacredness of private property. That right should never be 
invaded in this country, lest it be clearly in the exercise of 
some need of the public good. But the question that I want to 
impress upon you is that in this country that those of us who 
worship at this shrine of private property must not deceive 
ourselves. We are absolutely alarmed at the rapid growth of 
that school of political economy in this country which stands 
for the public ownership of all property and the withholding 
of all private ownership of any. With the growth of this idea 
the number of tenant farmers have increased in this nation in 
a greater proportion. The number less then a million 30 years 
ago is today 214 million. Step by step a spirit of unrest seems 
to be spreading throughout the United States and unconsciously 
we ask ourselves who in the last analysis is going to preserve this 
republic ? 

I do not want to alarm anybody but silently and surely we 
are approaching in this country the greatest crisis in our his- 
tory as a people. We are today face to face with conditions 
that threatens us from afar and at home. We must protect 
ourselves from those who might destroy us and attack us from 
witjiout and isave ourselves from those who would destroy us 



394 MARKETING AND FARM CREDITS 

from within. The first may be accomplished by the sword, but 
the second can only be accomplished by the plow share, 

"Oh," but you say, "would I force the rich to buy homes 
for the poor?" No, one thousand times no. But I do boldly 
declare that if in this country those who have and can do for 
others fail to heed the need of a homeless people who cannot 
do for themselves by themselves, that they are inviting further 
trouble which may grow all too soon to a degree too serious 
to contemplate. Build the small home in this country and this 
republic is safe. Did you ever hear of a man taking a shot 
gun and going out and defending a boarding house? No. But 
history is replete with the story of yeomen, and the valor of 
yeomen of many ages who laid their lives upon the altar of a 
home. So that is the question that confronts America. 

Let me illustrate to you what I am talking about. Within 
the past few months the financial interests of the United States 
have loaned to the European nations 1 billion dollars and we 
are told that within the 12 months they are to loan another 
billion dollars, making a total of 2 billion dollars. This in my 
opinion is one of the greatest mistakes that has ever been made 
in this country. It does not help us to protect ourselves 
against anybody else ; it makes us indirectly a party to a trans- 
action which excites the animosity of the jDcople against the 
government to which such loans are made. You will be per- 
haps astonished when I call your attention to the fact that 2 
billion dollars would make a loan of $800 to every tenant 
farmer in the United States — enough to start them all towards 
the ownership of land. Let him that hath, my friends, loan 
to his fellow that hath not, and that flag will wave long and 
proudly over the land of the free and the home of the brave. 

I hope the time will never come, my friends, when the gov- 
ernment will have to take up the question of settling the vast 
untilled areas by direct contract with the individual. But I 
do warn the financial interests of this country and say to them 
that if they lose sight of the moral obligation resting upon 
them to do something for somebody else that the government 
may finally be driven to a most drastic exercise of its police 
powers, not only for the protection of its citizenship but even 
for the perpetuation of its own existence. 

So, my friends, these are the broad questions that confront 
the people of this age. I appeal to the capitalist of this coun- 
try. I must believe in the patriotism and ability of my coun- 
trjTiien to work out these great problems ; but I appeal to the 



MRS. J. HAVILAND LUND 395 

capitalists of this country to study these great questions and 
to become imbued with a noble purpose to do something to re- 
turn us finally to the good old-fashioned individual and free 
democracy. I appeal to the capitalists of the nation to do that. 
We especially invite you to Texas and if you lend money to the 
homeless and the landless man — you do not have to give it to 
them, but if you loan to them that hath not, the effect will be 
that finally you will not only produce a citizensihip that will 
protect and preserve your investment, but you will live with 
the consolation that your life has not been in vain and that you 
have done something to benefit mankind. 



FINANCING FARM COLONISTS 

Mrs. J. Haviland Lund 
Secretary, The National Forward to the Land League 

I was so glad that so important an authority as Governor 
Herrick should have mentioned the fact that this false line of 
demarcation between the country and the city side of this 
problem must be annihilated, because some time ago, I took up 
what was called the city end of it, and these men who were so 
interested in these vital rural problems seemed just a little bit 
annoyed to think anybody should talk about any man in the 
city going to the farm. Yet in the same breath these men were 
saying that there was this heavy and alarming exodus from 
the country to the city. But they knew, of course, that the 
majority of immigrants coming here had had agricultural ex- 
perience, not thinking that the city man, who is likely to want 
to go to the land is not the unskilled clerk, but the man who 
knows something about farm life. And this country boy, who 
has come away from the farm into the city, lured there by the 
prospects of making a great deal more money than he has on 
the land, in many instances is disappointed, as you know. But 
his experience in the city has been a most valuable one. He 
has learned something about applying business principles to a 
farm, and the problem of teaching your farmer cooperation in 
business is a problem that you are all familiar with, and I will 
not go further into that detail. 



396 MARKETING AND FARM CREDITS 



City Man Fails as a Real Farmer 

Xo one knoAvs better thau the National Forward to the Land 
Leagne that the man from the city going to the farm is almost 
sure of failure, "We have held back nearly everybody of this 
type coming to lis and asking to go to the land. We have said, 
"Don't dream of going." The average man cannot possibly 
go on the farm and make a success, because it is almost impos- 
sible to go into a local community Avhere there is cooperation of 
the farmers. So the question of course occurs as to the best 
way to start them in. Now, our way of solving the problem of 
how to stop the exodus fi-om the city to the country under the 
banner of the land speculator is this. 

That as this mass of people are buying land of which they 
know nothing and of which nobody else knows anything, that 
the tirst and most important thing is to have a bureau of infor- 
mation where information about land could be secured. It is 
evident on the face of it that that bureau could not have any- 
thing to sell. So that our bureau was organized as a purely 
educational and formative body, a nonprofit making institution, 
under state supervision. You know how difficult it is to conduct 
anything close to the land, and not have some graft creep in. I 
knew it, and I have this organization so arranged that it is un- 
der state supervision and Ave can put a stop to anything if it 
should creep in. 

Now, if this bureau of information is to have the ear of the 
public, it must catch the eye of the public, because the most of 
the working people don't read much of anj-thing but the news- 
papers and the magazines. So we must have some Avay of eter- 
nally keeping oui-selves in the newspapers. So I put on this 
board, behind our bureau of information, the representatives of 
all the church organizations. "We have the Catholic Coloniza- 
tion Society, the JcAvish Industrial and Agricultural Aid Society, 
the Salvation Army, the Methodist Church, the PresbA-terian 
Church, and all of the rest of them. And then the different edu- 
cational bodies. "We have Dr. Carver, Dr. Calenstein. and so on 
and on — important pe,ople aaIio haA'e demanded the contidence 
of the public because they are not conunercial ; they are known 
not to be business men. 

NoAv, I know that the business side of this plan has to be con- 
ducted by business men, but this buivau must be educational, 
and they have a local professor AAith the business organization 



MRS. J. HAVILAND LUND 397 

that is conducted by business men. So, in that way, by having 
this bureau of information and having the people who want land 
come and ask us about it, we were able to select those people in 
the city wiho did want to go to the land, and to find out whether 
or not they were qualified for farming. We opened night classes 
in agriculture in our bureau of information. These classes are 
conducted by the extension from the state university, men from 
the federal department of agriculture in Washington and men 
from the state farm bureaus. Then we took it up with the board 
of education in New York, and they have agreed to put night 
classes in agriculture in the public schools, so that we will have 
these units of organization throughout all the cities with the 
public school as the answer. They are teaching those people not 
to buy any land unless it has been inspected by an organization 
that has no land to sell, then after that there is that inspection, 
and the United States government men give us our soil service, 
and our attorney advises us on the titles and contracts and forms 
of mortgages and notes and that sort of thing. 

The next step was this. When the colonists came to us for 
these classes, we had them register on cards, saying what their 
qualifications were to go out on the land. The next step was to 
see where the capital was that would aid them any in the way 
that we had to have it done. Mr. Newell told you just now how 
much capital it takes to equip a man in starting on the farm. 
You know perfectly well that the average working man and wom- 
^n has not that much money. 

Now, the people that have to go and buy their land, that 
cannot get on government land that costs them nothing — how 
are they going to go? They have saved, maybe, $400 or $500. 
It is not sufficient for them to start out and buy a farm. Now, 
of course, you know that collective security is the best security 
in the world when there are good honest, industrial men back 
of that security. I do not need to argue this matter of rural 
credits to this audience. You know more about it than I do. 
But, if we can, in the city from our night classes, pick up 50 
Armenian farmers, or 50 Russian farmers, or 50 Lithuanian 
farmers, men who know farming and whose priests say they 
are good men, then if those men have $300 or $400 apiece, and 
the state of Alabama or the state of Georgia, or some other 
state wants the settlers, they say, "Yes, we are willing to give 
credit to the right kind of men, but we don't know anything 
about them." There has been no way of finding out until this 



398 MARKETING AND FARM CREDITS 

bureau of information lias been able to act as a clearing house 
for these people. 

But, we can say to these states, "Here we have 50 families 
of such and such nationalities ; their priests will go with them, 
and Dr. Calenstein has said he will go and organize a school 
down there, and the Y. M. C. A. will send a state secretary. 
Now these people have got to go on ready-made farms. They 
have only got a few hundred dollars to pay down. You will 
have to build their houses and their bams and you must put 
the school on the place and the implements on the farms and 
you must give them a long term of years to pay for it. This 
is a perfectly safe investment. You must stop looking at it 
from the speculative end of it. You must see that that man 
has capital with which to operate. 

Movement Has Won Response 

Now, the response to this has come. Because just the minute 
that these people that have land to sell, just the minute that 
the railroads knew the plan on which I was working, just the 
minute that the banking associations, most thoughtful men, 
saw the conservative lines along which we were working, they 
simply said, * * Why, of course, we can furnish that credit ; that 
is a safe credit." 

We have capital that is willing to equip these lands in model 
rural villages. Now, what does that mean? We have had 
general planning. We know the wisdom of general planning. 
Now, we are going to have rural community planning. And in 
Florida and Alabama we have the opportunity of setting that 
right. Now, there has been inspected a tract of land of 5,000 
acres in Alabama, and 200,000 in Florida, and plans are now 
being drawn for these model rural villages. And when these 
people go out, they go out with the knowledge of their friends, 
they know each other. They have their own religious leader. 
In all of the successful colonies we have had a religious ele- 
ment within them. And they have the agricultural instructor. 
They have this rural school, with its social center equipment. 
They have all of those things that make for a peaceful success- 
ful life, and it only takes a few hundred dollars with which to 
start. 

Now, the Florida group of men have said that they will hold 
that whole 200,000 acres of land at a flat price. I always make 
them tell in advance what the price will be and not have them 



MRS. J. HAVILAND LUND 399 

put up the price. But this group of men will hold that at a 
flat price. So that we are now organizing these colony groups 
to go down there. Your farm tenant and farm laborer, who 
has saved a few hundred dollars now has the opportunity of 
buying in and getting a fully equipped farm. Why? Because 
it is done on a large enough scale to make it possible. In- 
dividually it cannot be done. The cooperation for rural com- 
munity building must begin in the city, and then when your 
people in the farming communities see how it works, I think 
they will follow suit. When your bankers and business men 
who have not had the confidence in this personal security see 
how it actually works out in a group, then they will be con- 
vinced. I do not think anything is more valuable for the legis- 
lation that we need in rural credits, or nothing more favorable 
to the standardization of farm products and markets than the 
fact that we can take groups of 50 and 100 families that are 
congenial and send them into a place where they have this in- 
struction and where they have the opportunity of doing the 
thing right from the beginning, instead of going into a com- 
munity, as you have to now, and begin to undo all that they 
have done for so long a time. 



FINANCING FARM BUSINESS 



26— M. F. C. 



SUGGESTIONS FOR RURAL-CREDITS 
LEGISLATION 

Myron T. TIkkrick 

Former Governor of Ohio; late Ambassador of the United States 

to France 

The farm-credits movement whose simple but grand objects 
originally were coiipcu'ative banking? and lonff-term mortgaj^ing 
has taken on such paternalistic and socialistic tendencies that 
it likely will be written in history as the farmers' state-aid 
craze. Amazing headway has been made in the use of the cash 
and credit of government and of special privilege for farmers. 

Arizona has permitted the proceeds of state lands to be in- 
vested in farm mortgages, 

(California adopted a resolution to amend the constitution so 
as to permit the state to use public funds and credit for farm- 
ers. This was beaten at the polls. 

Colorado has permitted funds derived from certain public 
lands to be invested in farm mortgages. 

Florida has exempted all farm and grove products from the 
license tax when offered for sale by growers. 

Georgia adopted a resolution to amend the constitution so as 
to exempt from taxation all farm products, including baled 
cotton, in the hands of the producer. This was approved at 
the polls and a law has been passed accordingly. Georgia also 
memorialized Congress to pass one of the state aid bills pend- 
ing for rural credits. 

Indiana has given to rural loan-and-savings associations the 
privilege of requiring the auditor of state to serve as trustee 
of the farm mortgages securing their bonds. 

Kansas now permits the holder of a farm mortgage deposited 
with the state treasurer to issue bonds certified by that official 
to the effect that the security is ample and its title perfect. 

Louisiana adopted a constitutional amendment authorizing 
exemption from taxation of lands improved for homesteads by 
or for immigrants. Louisiana also has enabled the owner of 
I'ural real estate to issue bonds up to 60 j)er cent of the value 



404 MARKETING AND FARM CREDITS 

as appraised by a commission of 3 bank cashiers of the parish, 2 
of whom shall be appointed by the district judge. The mort- 
gages must be made in the name of the sheriff as trustee. 
The bonds may be registered with the county clerk and made 
payable to bearer, without imposing any personal liability on 
the maker for their payment. 

jMinnesota adopted a resolution to amend the constitution so as 
to permit permanent school and university funds to be invested 
in farm mortgages. 

Mississippi memorialized Congress to pass one of the bills pend- 
ing for rural credits that provides for the creation of public land- 
credit banks with power to issue bonds guaranteed by the U. S. 
government, for raising money for farm mortgaging. 

Missouri passed a special act creating a public land credit bank 
to be managed by the governor and other state officials, with power 
to issue tax-exempted state-guaranteed bonds for raising money 
for farm mortgaging. 

]\Iontana has created a department of farm loans with the state 
treasurer as commissioner and the county treasurers as local rep- 
resentatives to issue bonds and make tax-exempted loans on farm 
lands. 

New York has created a highly privileged tax-exempted land- 
credit bank with power to issue bonds upon the securit}^ of farm 
mortgages trusteed with the state comptroller. 

North Dakota adopted a resolution to amend the constitution so 
as to permit the use of fluids and credit of the state in forming 
agricultural credit associations. 

South Dakota adopted a resolution to amend the constitution 
so as to permit the state or contiguous counties to create and main- 
tain rural credit sj-stems for making farm loans. 

Utah passed a law on cooperative land-credit banks with power 
to issue bonds upon the security of farm mortgages trusteed with 
the state treasurer. 

Wisconsin requires the assessor of incomes to certify the value 
of farm mortgages taken by land-mortgage associations, and the 
state treasurer to serve as trustee of the securities for the bonds 
issued by such associations. 

In the Philippine Islands the government "Agricultural Bank" 
has been created by a special act. 

In Porto Kico the semi-public "Insular Bank" has been cre- 
ated by a special act for extending credit on farm land and tc 
agricultural enterprises. 



MYKON T. HERRICK 405 

Many of the laws on cooperative credit associations recently 
enacted by the states provide for tax exemptions. 

At the last session of Confess, the senate passed the McCnmber 
bill providing for the creation in the treasury department of a 
farm-credit bureau with unlimited power to issue government 
bonds for farm mortgaging. The house passed the Bulkley bill 
providing for the issue of bonds by public land-credit banks and 
for the obligatory purchase by the U. S. Government of an amount 
of such bonds that might equal $50,000,000 a year. 

A new bill on rural credits must be submitted to Congress on 
or before the first of January by a committee created for that 
purpose. Bills will also probably be submitted to all the legisla- 
tures of the 12 states, which convene within the next 2 months. 
The rage for state aid and special privilege appears to be as keen 
as ever, so no forecast can be made as to where it will go before it 
blows over. Consequently it is high time to consider the purpose 
and effect of such assistance. In Europe the bureaus, commis- 
sions, and institutions that exist for using the cash and credit of 
government were established either for breaking up the feudal 
system, or to distribute money obtained or appropriated for ig- 
norant or indigent peasants, or to meet problems arising from ab- 
senteeism, city congestion, compulsory military service, land re- 
clamation, or interior colonization. Their size and number will 
probably be enlarged and added to for relieving distress after the 
Great "War is ended. 

The use of state aid in such circumstances is unquestionably 
proper. In the United States, however, the assistance provided 
in the legislation enacted and proposed is intended for aU. classes 
of farmers. The legislators most active in the cause have as- 
sumed that the only relief for the financial troubles that beset 
agriculture must come through government intervention. They 
have taken this stand although President Wilson, Secretary Hous- 
ton, and other eminent authorities declare that there is no emer- 
gency calling for special privilege or for the use of the cash or 
credit of government for farmers. Thus, an unfortunate turn 
has been given to the movement for rural credits that cannot but 
be deplored by students of the subject, since it has incited bitter 
opposition to the movement and otherwise interfered with its 
progress by confusing the main issue with another issue that has, 
in fact, no connection whatsoever with the reorganization of land 
and agricultural credit facilities. 



406 MARKETING AND FARM CREDITS 

State Aid not Infallible Remedy 

State aid is uot au infallible remedy for rural credit troubles, 
Indeed, it lias recorded as many failures as successes. One of the 
dangers lies in its being misapplied or in subjecting government 
to loss in the event of default by bori'owers. Denmark, France, 
Russia, and some of the Balkan states have had very unenviable 
experiences — but it is not necessary to seek the proofs in Europe, 
because they can be fouud in this country. In 1S36 a surplus 
then in the U. S. Treasury was deposited ^Yith 26 states. New 
York's share was $1,014,520.71. She invested a large part of this 
sum in loans on fanu lands. The loans were extended from time 
to time : none has been collected. The mortgages in many in- 
stances are not worth the debt. The investment, handled by 
several generations of politicians, is perhaps gone. 

In 1902 the United States set aside for iirigation projects all 
except 5 per cent of the money to come froni the sale of public 
lauds in 16 states. This has amounted to $81,813,772.71 so far, 
and has been used in construction work. The cost, apportioned 
among the tracts improved, was under the original act to be re- 
paid by the owners in 10 instalments without interest. But de- 
faults were imminent, so last year the period was extended to 20 
years. The settlers are asking for still further favoi*s, and the 
Teclamation service has been obliged to boiTow $21,000,000 to 
.complete its work. The settlers in these irrigation projects have 
received more state aid than the farmers in any other country, 
-except Ireland and Kussia. In other words, this is the third 
lai'gest instance in the world of state aid for farmers. The legis- 
latoi'S have overlooked this noteworthy fact and the other fact, 
• equally important, that the experiment is not satisfactory from 
the standpoint of either the settlers or the United States govern- 
ment. 

Eegrettable as tlie rage for state aid may be it serves, however, 
:^a good purpose in proving conclusively that the rural credit fa- 
>eilities in the United States are bad : it would not have occun*ed 
if they were all right. It confirms every thing that I and other 
men have been saying to the effect that American farm finance is 
basicly wrong. In North Carolina, according to ]Mr. John 
Sprunt Hill, the small cotton growei-s pay as high as 38 per cent 
interest a year on short-tei-m loans. If this be so in that state, 
it is true j^erhaps in other southern states. A sample list com- 
piled last month by the comptroller of the currency. Mr. John 



MYRON T. HERRICK 407 

Skelton "Williams, from the books of a national bank in the West 
shows 174r cases wihere farmers were charged 10, 10, 600, 800, 
1,600, 1,820, and 2,400 per cent interest a year. Regardless of 
how prevalent these extortionate practices may be, they are suffi- 
ciently numerous to prove, when taken in connection with the 
widespread demands for state aid, that a thorough reformation 
of farm finance is absolutely necessary in order to place Amer- 
ican agriculture on a proper basis. 

Two Elements in Farm Finance 

Farm finance includes both land and agricultural credit. Land 
credit rests, of course, upon getting money from the investing 
public. This money cannot be obtained at a fair rate unless 
there be sure methods of proving titles and easy procedure for 
recovering loans. Hence, the first requisite is the enactment of 
proper real estate laws. The Torrens' system has already been 
adopted by 12 states. If it were adopted by all the other states, 
much of the cost and difficulty in proving titles would be elim- 
inated. The commissioners of uniform state laws have pub- 
lished a model for a Torrens' act. The foreclosure laws in many 
states are faulty. If the redemption period were reduced to a 
reasonable time and if the procedure were simplified in respect 
to sale and confirmation after default, the heavy expenses and 
delays in collecting defaulted loans would of course be removed 
— and all this would tend to cheapen land credit. Some of the 
states already have good laws. The laws of all the states should 
be uniform. This is the main thing, since land credit must be 
standardized to be marketable. 

It is worse than useless to enact laws on land credit institu- 
tions before making these necessary revisions of the general 
real estate laws. To do so, would be like erecting a superstruc- 
ture upon a defective foundation. Legislation for land credit 
institutions ought not to be enacted in advance of laying this 
esential, statutory foundation for them. The land credit in- 
stitutions that are most needed in the United States are those 
for issuing bonds or debentures against farm mortgages. Aside 
from the totally unnecessary public or semi-public land credit 
banks, this country now has to perfection all other kinds of land 
credit institutions needed for farmland credit, except bomd and 
mortgage companies and landshafts. It has few of the first and 
none of the latter, and yet these are the only two concerns that 
should be allowed to issue bonds or debentures. The bond or de- 



408 MARKETING AND FARM CREDITS 

benture is the only means by which long-term lending can be prac- 
ticed on a large scale, or by which land values can be mobilized. 
These 2 great ser^'ices are possible because of the simple fact 
that the investor may place the bond or debenture on the mar- 
ket and thus recover whenever he wishes the money invested 
in the mortgages, no matter how long may be the period of 
the loan. But to be marketable this instrument must of course 
be made safe and sound by legislation. 

The 2 master clauses in a good law for bond-and-mortgage 
companies are : (1) capital stock and surplus must be main- 
tained at a safe ratio to bonds or debentures; and (2) bonds or 
debentures in circulation must represent first liens on lands of 
adequate value and never exceed outstanding loans either in 
amount or in interest rate. One dollar to $20 is usually deemed 
a sufficient ratio. The capital stock is always required to be 
large enough to give the company a strong standing in the 
financial world. My opinion is that if Congress enacts a law, 
the minimum for capital stock should be $10,000,000. In none 
of the states should it be under $500,000. I do not believe 
that small companies could sell their bonds or debentures out- 
side their own localities. If they could not do so it would be 
useless to allow them to be chartered, because they would be 
unable to make many loans. There should be no hesitation in 
affording agricultural institutions of a size cemmensurate with 
its needs. 

A landschaft is a district created and officered under a spe- 
cial act or general law by the owners of the farms lying in the 
district. A landschaft has no capital stock. Consequently the 
limit to the issue of its debentures is determined by the value 
of these farms, and is usually 60 per cent of that value. A 
landschaft is verj'- similar to the drainage districts that exists 
in some of the states. For instance, an Illinois drainage dis- 
trict for agricultural purposes may be created and officered by 
landowners. These officers may assess benefits proportionately 
against the separate farms, and these assessments are an inde- 
feasible claim that is collected like taxes under the revenue 
laws; just so with a landschaft. The drainage district may is- 
sue bonds up to near the amount of the assessments; a land- 
schaft issues debenture up to the amount owning by borrowing 
members. The main difference is that the drainage district 
negotiates its bonds and uses the proceeds for drainage works, 
while the landschaft turns its debentures over to the borrowers 
to be used by them in raising money for individual loans. 



MYRON T. HERRICK 409 



What Will Solve Land Credit Problem 

In brief, my idea of a solution of the land credit problem is 
the adoption of the Torrens' system, the revision of the fore- 
closure laws, wherever necessary, and the enactment of gen- 
eral permissive laws for bond-and-mortgage companies and land- 
schafts. The landschafts are a subject for state legislation 
only. Both the nation and the states, however, might enact 
laws for companies. The laws of the states ought to be uni- 
form so as to standardize bonds, debentures, and mortgages. 
The only kind of inspection or government intervention needed 
is that which is now provided for banks. The only regulations 
and restrictions should be those that would safeguard borrow- 
ers from oppression and investors from fraud and recklessness. 
This done, I believe that it would be possible to undertake the 
great enterprise of converting the $2,000,000,000 of farm mort- 
gages, which now exist, into long-term loans and that a flow 
of money could be directed to the land in sufficient volume and 
at fair interest rates to supply the needs of the landowners. 

tack of Organization Dang-er to Agriculture 

The solution of the land credit problem cannot, however, re- 
move all the difflculties that surround agriculture. The chief 
trouble with American agriculture is lack of organization. 
Aside from some notable exceptions in fruit and dairy regions, 
the farmers are not organized either industrially, commercially, 
or financially. They have no collective purchasing, marketing, 
or banking systems of their own. Each farmer relies upon 
himself for what he buys, sells, or borrows. As a consequence 
there are wastages and losses that seriously affect both pro- 
ducer and consumer, while the individual farmer is left at the 
mercy of any unconscientious person who wishes to exploit 
the exigency of his affairs. Particularly is this so wherever 
he has urgent need of money, as provided by the cases I have men- 
tioned. The American farmers are unexcelled in capacity, in- 
telligence, and education ; and they possess in fertile lands, nat- 
ural resources, personal qualifications, material conditions, and 
in all other respects everything that makes for agricultural 
prosperity, except organization. Moreover, they are the rich- 
est farmers in the world; their wealth in the aggregate and 
their combined earning power are almost beyond comparison. 



410 MARKETING AND FARM CREDITS 

The American farmers perhaps own 45 billion dollars of 
property and this year raised 12 billion dollars of products. 
Nevertheless, they remain unorganized and allow this stupend- 
ous wealth and income, upon which the very existence of the 
nation depends, to lie scattered for all who wish to pick a profit 
from them. Practically no animal or vegetable product reaches 
the market, without some unnecessary sum abstracted from the 
I>roducer's or added at the consumers end of the deal, and the 
proceeds that are finally returned to the farmer are usually 
placed in some commercial bank to be used in industries other 
than agricidture. Since organization is the only thing the 
American farmers lack, it is this shortcoming that may logically 
be assigned as the cause of their troubles and distresses, their 
complaints against bankers and merchants, and their demands 
upon government for state aid. Unorganized farmers always 
have been and will be victimized and made the prey of their 
own necessities. But organized farmers are able to take care 
of themselves; and this would surely be the case with Ameri- 
can farmers, because they own and produce more than enough 
to make them absolutely independent and self-sustaining if 
they only would utilize it. 

Organization a Necessity 

The farmers in the United States ought to be organized from 
the plains to tidewater, but if they should attempt to do so, 
they would encounter legal obstacles, since the laws have not 
been framed with a view to agricultural organization. The 
only ways by which 2 or more x>crsons can unite for an economic 
object are the partnership, the corporation, and the association. 
A partnership is not intended for a numerous and fluctuating 
partnership, and so is of little use for farmers. A corporation 
is a joint stock company with a capital stock that is fixed by 
the charter, paid in at the start, and voted by the stockholders 
according to their shares, but owned by the company itself. 
As a great jurist once said, a corporation may be formed with- 
out a body to be kicked or a soul to be damned. Its prime 
purpose is the employment of capital and labor for paying div- 
idends to investors. Manifestly it is not intended for use 
where the capitalists, laborers, and investors are identical per- 
sons, as would be the case with organized farmers. 

An association is a voluntary union of persons under a plan 
that preserves the equality and personal responsibility of mem- 



MYRON T. HERRICK 411 

bers. Usually a uiomber has only one vote, and this cannot 
be east by proxy. The liability assuined by nionibors may bo 
limited, unlimited, or contributory. Shares nmy or may not 
be issued. If issued, they are simply certilicates of deposit on 
which the credits may be withdrawn upon notice by holders. 
So the fund thus accumulated dill'ers from the cnpital stock of 
a corporation in that it is variable and is owned not by the as- 
sociation but by the contributing members. The shares may 
be paid in installments. Consequently, ^Yhile a corporation can- 
not begin without money an association can begin practically 
without a cent. It is because no money need be put up at the 
start and because nil money in is withdrawable that an as- 
sociation is more attractive than a corporation to small invest- 
ors. Moreover, the [)ei*sonal responsibility of the members ami 
their direct participation in the management make the asso- 
ciation peculiarly adaptable for those mutual relations and 
practices that constitute what is called cooperation. 

Cooperation Is Not Understood 

For these reasons the association is the best form of organ- 
ization for farmers. Tliei\> is no kind of business or finance 
that could not be conducted through an association, provided 
the members reside close enougli to its headquarters to take 
part in its atVairs; but legislators have not yet fully realized 
this fact. The association has been legalized for savings bank- 
ing, life insurance, the building and loan idea, and for a few 
other purposes; and in every instance it has proved entirely 
safe and wonderfully effective. Tiie world would be all the 
better if the association form and practices were more exten- 
sively adopted for economic objects. But generally speaking, 
the association has been relegated in the United States to so- 
cial, religious, eleemosynary, ctlucational, thril'l, and non-profit 
uses. Nearly every state (it is true) has a law on cooperative 
associations or societies, but the nuijority of these laws was 
framed on the postulate that the association cannot be used for 
profit-making, and that cooperation is a benevolent or altru- 
istic means for encouraging brotherly love among poor and in- 
dividually incompetent persons. 

This pitiably wrong idea has been written into the recently 
enacted laws on the so-called credit unions or coiiperative credit 
associations in Massachusetts, New York, North Carolina, Ore- 
gon, the Philippine Islands, Rhode Island, South Carolina, 
Texas, Utah, and Wisconsin, The error is responsible for the 



412 MARKETING AND FARM CREDITS 

tax exemptions, the limitation of the interest rate on deposits 
or of dividends, and the various restrictions that have made 
those concerns worthless for farmers. Owing to these miscon- 
ceptions about cooperation and to the failure to grasp the fact 
that cooperation works best through the association, the prog- 
ress of agricultural organization has been retarded in spite of 
all the efforts that have been made for it during the past 5 
years. A cooperative association may be defined as a voluntary 
union of persons for utilizing their collective energies or re- 
sources, or a part of them, under their own management in 
some economic enterprise carried on upon their common ac- 
count with a view to their mutual and individual benefit. A 
cooperative bank is an association with full banking powers 
that confines its credit facilities to members. 

Americans Cannot Look to Europe for Guidance 

It would be well for the states to recast their laws on coopera- 
tion and to enact new laws for economic associations and asso- 
eiational banks. Cooperation exists in such great variety that 
its definition is exceedingly difficult, so the word and its deriva- 
tives might be excluded from the statutes, except in the titles. 
Their absence would occasion no harm, because the practice of 
cooperation is automatic in a properly formed association. 
There is no European law that can serve as a model. We shall 
have to create anew. The American laws should provide for all 
forms of associations and permit their use for any kind of busi- 
ness or finance, banking included. Moreover, the Sherman act 
should be amended so as to permit combinations for agricul- 
ture, small industries, and the like. This is especially necessary 
for farmers, because agricultural organization depends upon 
the formation of systems of interrelated associations. But in 
all other respects the laws should be free of class legislation, 
special privilege, and tax exemptions and should also be avail- 
able for all. The workman, tradesman, and small industrial is 
as much in need of cooperation as the farmer. I submit the 
following program : 

An amendment of the national banking act so as to per- 
mit a national bank that confines its credit facilities to mem- 
bers to be organized as an association without capital stock. 
An amendment of the banking act of each state so as to 
permit any kind of bank that confines its credit facilities to 
members to be organized as an association without capital 
stock. 



MYRON T. HERRICK 413 

An enabling and regulatory law by the nation and by 
each state, legalizing for economic associations whatever is 
lawful for corporations. 

A clause in such laws to permit combination among farm- 
ers ' associations and assoeiational banks, among associations 
organized for selling food and household supplies to mem- 
bers, and among associations organized by artizans for buy- 
ing on their common account the materials needed in their 
work or for selling their products. 

Legislation along these lines is all that is necessary for co- 
operation. After it had once been enacted, farmers, trades- 
people, small producers, and small consumers would here and 
there avail themselves of it. Their success would encourage 
others ; and then gradually but with ever increasing speed co- 
operation would spread in town and country throughout the 
land, just as was the case in Germany, Italy, France, and else- 
where after the laws on associations were put on the statute 
books. If societies or boards of earnest propagandists were 
formed to lend a hand, they could materially help the good 
work along. But it should always be borne in mind that co- 
operation rests upon the individual initiative and mutual self- 
help of the persons to be benefited, and that charity, state aid, 
or extraneous assistance of any sort would impair its effect. 
The fact should also be kept in mind that the agricultural as- 
sociations should combine. Detached and isolated agricultural 
associations could be only partly successful. The farmers 
ought to form great decentralized systems of interrelated na- 
tional, departmental, state, regional, and local associations. 

The growth, however, should be not from the top downward, 
but from the ground laterally and upward. Nothing should 
I)e forced or artificially hastened. The development should be 
natural and orderly, and each system should be based on local 
rural cooperative banks. The first step toward agricultural or- 
ganization is the formation of these basic units. We all know 
what these wonderful little concerns are, so there is no need of 
discussing details here. They may adopt any of the assoeia- 
tional forms. The investigation and study that I have made 
lead me, however, to favor the Raiffeisen society, as I have de- 
scribed it in my book on "Rural Credits." 

A Raiffeisen society localizes its operations to a small area, con- 
fines membership to mutual acquaintances, and imposes unlim- 
ited liability. It does not issue shares nor distribute dividends. 



414 MARKETING AND FARM CREDITS 

Its aim is economy rather than gain. It limits profit-taking to 
its actual necessities and carries net earnings to an indivisible 
reserve. This reserve thus slowly accumulated takes the place 
of the capital stock and guaranty fund of a corporation, pro- 
tects members from liabilities, assures the financial standing of 
the association, and makes it a permanent institution in the 
neighborhood. This tyipe of associational bank is the best ever 
devised for stabilizing the rural population, for vitalizing the 
spirit of cooperation, and for enabling farmers to utilize their 
credit and other resources for their agricultural purposes. In 
my opinion thes closer a rural organization adheres to the princi- 
ples and practices of Raiffeisen, the more effective and lasting it 
will be. 



THE AMERICAN LAND OWNER AND HIS 
FINANCIAL NEEDS 

David Lubin 

Delegate from the United States to the International Institute of 
Agriculture at Rome 

German farmers, originally, were not brighter than the 
American farmers ; in fact, they were not nearly as bright. It 
is only now when they are operating under their effective eco- 
nomic systems that the German farmers have become bright, 
as bright as the American farmers, and very much brighter. In 
fact, they have become the brightest farmers in all the world. 

But we have not yet been told how the potential brightness 
of the German farmers became materialized into actual bright- 
ness. "Was it then the German farmers who invented and de- 
vised these effective economic systems and obtained their leg- 
islative enactment? 

No, it was not. They were devised and given legislative en- 
actment by the government. Why by the government? Be- 
cause it is a well known fact that farmers, as a result of their 
environment, are too conservative to devise systems or to pio- 
neer the way for teh adoption of changes in mode or method. 
The farmers the wrld over are the last to make changes in their 
style of garments, their mode of speech, or their opinions. No, 
the German farmers devised no such systems, nor did they 
pioneer the way for their adoption. 



DAVID LUBIN 415 

They were devised and adopted for them by the power and 
far-seeing wisdom of their autocratic government. The rulers 
of Germany foresaw the tendency which the rising tide of so- 
cialism promised to lead up to; the socialism which was con- 
fined mainly to the urban population — to its cities; the social- 
ism that threatened the destruction of their political status quo. 
The government, therefore, sought a method for the control or 
eradication of this socialism, and it is believed that that method 
could be found in the strengthening of its conservative elements 
— its farming population. 

Under the belief that with the reinforcement of sufficient 
strength the conservative farmers would prove more than a 
match for the control of the socialist radical of the cities, the 
ruling power of Germany devised and enacted into law the 
economic systems of rural credits and marketing now operat- 
ing there. Experience has since proven that the rulers of Ger- 
many were in the right; for not alone does the present advan- 
tageous economic status of the German farmer, under these 
systems, hold in check the socialism and radicalism of the Ger- 
man cities, but it has also so strengthened Germany as to ren- 
der her almost invulnerable and invincible. 

The economic and political advantages of the German sys- 
tems of rural credits and marketings are so evident as to jus- 
tify the prompt and well-directed efforts of the American farm- 
ers for their realization. 

But is there not a break in the logic of these statements ? "We 
are told that these systems were devised and put into operation 
by governments; that farmers are too conservative to devise 
effective economic systems or pioneer them in these stages for 
their enactment. But we have also been told that the farmers 
rather than the legislators will have to devise them and pioneer 
the way, "get busy" for their adoption. So, then, we seem to 
travel in a vicious circle of contraries. The government can 
act but should not or will not; the farmers cannot but should. 

It is high time for such farmers to look about them and see 
what changes in economic methods have taken place since the 
last half of the nineteenth century. There is the telephone 
and the telegraph. In the sale of his annual 10-billion dollar 
production how much use does the farmer make of them in com- 
parison with other merchants who sell an equal amount of 
goods? 

"What are you talking about!" exclaims the farmer. "Do 
you take me for a merchant ? ' ' 



416 MARKETING AND FARM CREDITS 

Well, if you are not sufficient of a mer<?hant to sell your pro- 
duction, then you must rest satisfied if others do the selling for 
you. and. of course, iii their own way. 

But to return for a moment to the telephone and telegraph. 
to the modem inventions for the transaction of business. There 
are the steno^apher. the typewrit4?r. the card iudex. the board 
of trade, the chamber of commerce, the clearing house, the mer- 
cantile agency, and the thousand and one other devices and 
methods for the economic transaction of modem business. Do 
the farmers use these to the extent that other business men do? 
But above all. does the farmer realize that since these inven- 
tions eame along there has be^en a eooiplete change in the 
method of employing capital and in the method of employing 
mental energy? Beforetime business was traasaeted by indi- 
viduals or firmss but in our day biisinc^a? is transacted through 
corporations, many of them with business ramincations as wide 
as this country and some of them to a wider e3rtent — some 
world-wide. 

With what mechanism does the farmer commercially speak. 
eommen?ially hear, commeivually go, and ctMomercially see? 
Only with the organs of his own body. eonse<iuently the farmer 
is^ as it wer^, a eomniereial eul-de-sae. He is eommereially lame, 
efoaniaviaDj dmab, eommeivially deaf, and eommejreaally blind. 

Is Cooperation Socialistic? 

"Well,** says the farmer. "I will prefer all this to blindly 
rushing into som.e wild socialistic scheme. I do not wish to 
give vp my independence by Ivjnping my property into S(»iie 
rattletrap cooperation or corporation.** 

The farmer that would make sueh a statement would elearly 
be uninformed, for neither under the Landsehaft method of 
rural credits or under the Landwirtschaftsrat system of mar- 
keting would it be ne<?essary for him to give up 1 ioka of kb 
independence or to "limip his property into some rattletrap eo- 
oi^eration or cv>rpoartion. " nor can either of the 2 proposals be 
classed as "'wild socialistic schemes/* I'nder the Landsekaft 
rural credit systems he gives, say. S20,OOO worth of property, 
properly appraised, for a $10,000 K>nd, and so do all his neigh- 
bors. While the bond of a Landsehaft is not given on any 
special piece of property of that Landsehaft, each bond issued 
may only be upon the limit of the mortgage as permitted by the 
Landsehaft. It therefore follows that each farmer under the 



DAVID LUBIN 417 

Landschaft law is iu reality only responsible for his own in- 
debtedness. This has proven to be the ease in Germany, where 
the Landscraft has been in operation during the past 152 years. 
As for the marketing or distributing system, that is in nowise 
a corporation. It is simply an organized semi-official nation- 
wide bureau, which embraces the services of agriculture that 
commerce receives through its boards of trades, chambers of 
commerce, clearing houses, etc. 

In other words, where the farmer now sees with his own 2 
eyes, he will have added to his commercial vision the commer- 
cial sight of millions of his co-workers. If we were to strip mer- 
chants and financial men of this kind of knowledge, we would 
make commerce and finance as incoherent, as disjointed, as il- 
logical, and as uncertain as is the commerce of agriculture to- 
day in the hands of the American farmers. The business and 
commercial world would not tolerate for a moment the abroga- 
tion of their sources of wide range, commercial knowledge and 
its resultant activities, and it can be safely said that once 
adopted neither would the American farmer abrogate it. And 
the first step toward the materialization of the proposals before 
us is the awakening of the American farmers from their dor- 
mancy. They must rise, gather themselves together, put on 
the hiRrness, and exert their power by pulling thie car of prog- 
ress forward — whether uphill or downhill — ever forward. If 
they pull hard enough, and each one does his share, they are 
sure to reach the goal. 

Fanners Must Change Their Ways 

Unless the farmers change their economic conditions by 
means of sound and sensible methods they must expect others 
to step in and manage their affairs for them. This after a 
fashion is being done now and has been done right along. And 
as it continues it is quite likely to develop and accentuate pres- 
ent grievances. But in what must it all end? It must end in 
converting this American democracy into a full-fledged au- 
tocracy as surely as the present democratized power of Ger- 
many's farmers must in the end convert the German autocracy 
into a full-fledged democracy. 

"Eternal vigilance is the price of liberty." And, pray, 
what does that mean? Does "vigilance" mean that the citi- 
zen is to be on the constant lookout for foreign dreadnoughts 
and submarines ? No ; that is the function of the secretary of 
the navy. Does liberty mean the right to shout "Scoundrel" or 

27— M. F, C. 



418 MARKETING AND FARM CREDITS 

"Villain" at any and all in public life? No; that is license. 
Liberty means freedom — free, equitable action and free, equit- 
able reaction within the body politic, especially so in the eco- 
nomic life of the people. 

What now may be said of the "vigilance" of the farmers? 
How is it made manifest in the field of economics? Shall it 
merely be limited to shouting "Wall street?" Shall it not 
rather be in effective economic work? 

Each farmer should make it his business to start the ball roll- 
ing by sending on petitions and letters to members of both 
houses of Congress, and there should be thousands upon thou- 
sands of such petitions and letters from every section of the 
United States demanding, first, legislation for the national mar- 
keting organization, and, second, the adoption of the Land- 
schaft system of rural credits. 

Sending on petitions and letters to Congress, however, is only 
a beginning. The farmers, though, of course, perennially busy, 
need not expect "Wall street" to do this work for them. They 
must do it themselves. It is true that in Germany this work 
was done for the farmer by his autocratic government. But 
in this country, in this democracy, the American farmers will 
have to take the leading stand themselves if this work is to be 
done at all. And, be it understood, the duty to proceed should 
not merely be prompted by the desire for economic betterment, 
but also by the higher one of political betterment. 



PROVIDING CREDIT DURING PRODUCTION 

Carl W. Thompson 

Specialist in Rural Organization Office of Markets and Rural Organi- 
zation, U. S. Department of Agriculture 

The question of "Providing Credit during Production" is 
for the most part a question of farm loans based on personal 
or collateral security rather than of loans based on farm mort- 
gage security ; and likewise it is ordinarily a question of loans 
for relatively short periods of time — i. e., for periods of less 
than one year. 

The aim of this paper will be, therefore, to indicate the 
charges paid by farmers for loans on personal or collateral se- 
curity in various parts of the country, to point out the factors 



CARL W. THOMPSON 419 

that cause variations in these charges, to show the relations of 
existing banks to this class of farm loans, and to consider cer- 
tain improvements that may be suggested in oonneetion with 
this phase of rural credits. 

From figures obtained by the office of markets and rural or- 
ganization of the United States Department of Agriculture 
bearing on charges for farm loans based on personal security, 
averages by states have been computed as shown in exhibit No. 
1. It appears that the average total cost on such loans — in- 
cluding interest and all extra charges — ranges from less than 
6^/2 per cent in the New England States to figures between 10 
and 15 per cent or even higher in the Southern and Rocky 
Mountain States; that in those states of New England where 
the total cost is lowest — below 6i^ per cent — the average extra 
charge above the nominal rate is only about y^ of 1 per cent, 
and in the more highly developed farming regions of the corn 
belt, where the total cost ranges between 7 and 8 per cent, the 
average extra charge is less than 1 per cent. On the other 
hand, in those states of the South and AVest that have the 
highest averages for total cost, the average extra charge often 
runs as high as 21/^ and Sy2 per cent. j 

Middle West Interest Rates ! " 

In New York and Pennsylvania the average nominal interest 
rate is less than 6 per cent and the average total cost is 7 per 
cent. In Illinois the average nominal rate is 6.6 per cent and 
the average total cost 7.4 per cent. In these states, therefore, 
the average extra charge on personal loans is about 1 per cent. 
In Iowa and Wisconsin the averages for the extra charge are 
only four-tenths and five-tenths of 1 per cent, respectively, the 
nominal rate in Iowa being 7.5 per cent, with an average total 
cost of 7.9 per cent, and the nominal rate in Wisconsin being 
6.5, with an average total cost of 7 per cent. One important 
factor which undoubtedly should be considered in looking for 
an explanation of the lower extra charges in Wisconsin and 
Iowa is the large percentage of loans in these states that is 
furnished the farmer by small local banks, as will be noted 
later. 

In North Carolina the average nominal rate is 6.6 per cent 
and in South Carolina, 8.3 per cent, showing a difference of 1.7 
per cent. The average total cost, however, is nearly the same 
in these 2 states, being 10.2 per cent in North Carolina and 



420 



MARKETING AND FARM CREDITS 



10.5 in South Carolina. The 6 per cent legal rate in North 
Carolina undoubtedly accounts for the low nominal figure re- 
ported for that state. Apparently the loan agencies of North 
Carolina make up in extra charges what they are not permitted 
to collect as interest. 

In Alabama the average nominal rate is 10 per cent and the 
average total cost 12.4 per cent. Alabama illustrates a section 
of the country where credit conditions are partly to be ex- 
plained by the prevalence of the system of advances to farm- 
ers by merchants, under which advancing system perhaps three- 
fourths of the farmers of that state still operate. 

Oklahoma appears to have the highest interest charge of any 
state, the average nominal rate being 12.5 per cent and the aver- 
age total cost 15.1 per cent. 

LOAIfS TO FARMERS ON PERSONAL SECURITY— AVERAGE RATES FOR 
INTEREST AND FOR TOTAL COST 



Geographic division and state 



New England: 

Maine 

New Hampshire 

Vermont 

Massachusetts 
Rhode Island . . . 
Connecticut — 



Middle Atlantic: 
New York .. 
New Jersey . 
Pennsylvania 



East North Central: 

Ohio 

Indiana 

Illinois 

Michigan 

Wisconsin 



West North Central: 

Minnesota 

Iowa 

Missouri 

North Dakota . 
South Dakota . 

Nebraska 

Kansas 



South Atlantic: 

Delaware 

Maryland 

Virginia 

West Virginia . 
North Carolina 
South Carolina 

Georgia 

Florida 



Average 


Average 


interest rate 


total cost 1 


6.5 


7.7 


6.0 


6.4 


5.9 


6.4 


6.0 


6.5 


6.1 


7.1 


5.9 


6.2 


5.9 


7.0 


5.8 


6.6 


5.9 


6.9 


6.4 


7.2 


6.9 


7.6 


6.S 


7.4 


7.1 


9.2 


6.5 


7.0 


8.3 


9.2 


7.5 


7.9 


7.7 


8.8 


U.O 


11.8 


9.8 


10.6 


8.S 


9.3 


7.5 


3.8 


6.0 


6.2 


6.0 


7.0 


6.3 


8.2 


6.2 


6.9 


6.6 


10.2 


8.3 


10.5 


9.6 


11.8 


9.2 


11.4 



CARL W. THOMPSON 



421 



LOANS TO FARMERS ON PERSONAL SEOURITT-AVERAGE RATES FOB 
INTEREST AND FOB TOTAL. COST— Continued 



Geographic division and state 



East South Central: 

Kentucky 

Tennessee 

Alabama 

Mississippi 

West South Central: 

Arkansas 

Louisiana 

Oklahoma 

Texas 

Mountain: 

Montana 

Idaho 

Wyoming 

Colorado 

New Mexico 

Arizona 

Utah 

Paciiic: 

Washington .... 

Oregon 

California 



-r- 



Average 


Average 


interest rate 


total cost 1 


7.3 


8.8 


8.1 


9.9 


10.0 


12.4 


8.7 


10.8 


9.9 


12.4 


9.0 


11.1 


12.5 


15.e 


10.2 


12.2 


11.1 


12.1 


10.4 


11.5 


10.2 


11.0 


10.6 


11.5 


11.4 


13.8 


10.0 


11.1 


8.8 


10.4 


9.8 


11.4 


8.4 


9.G 


8.4 


9.4 



^ Average of estimated total cost, including "discounts, bonuses, commissions, 
any other extra charges," as reported by correspondents. 



and 



Averages for interest charges and total cost have also been 
computed for subdivisions within states, following the plan of 
the bureau of crop estimates of dividing each state into 9 dis- 
tricts. This makes possible a comparison of loan conditions 
in the different parts of a given state. In Iowa the district 
averages for total cost for the 3 northern districts, reading from 
west to east are 7.9, 8.2, and 7.8 ; for the 3 central districts, 8.2, 
7.4, and 7.4; and for the southern districts 8.7, 8.2 and 7.2. It 
will be seen that in general the lowest averages are found in the 
eastern districts, and the highest averages in those farthest 
west. The widest variation is from 7.2 to 8.7 or 1.5 per cent, 
as between the southeastern and southwestern districts. The 
higher rates of western Iowa conform to the general upward 
movement in interest charges as one goes from east to west 
across the country. The apparent exception noted in the 
northwestern part of the state, which is tributary to Sioux 
City, illustrates the tendency toward lower rates in the prox- 
imity of financial centers. 

In Nebraska, the district averages are as follows: In the 
North (reading from west to east), 10.2, 10.4, and 8.8; in the 



422 



MARKETING AND FARM CREDITS 



central districts, 10.6, 8.9, and 8.3 ; and in the South, 10.4, 9.9, 
and 8.3. Reading the eastern districts together we have (from 
north to south) 8.8, 8.3 and 8.3, while the western districts 
show 10.2, 10.6, and 10.4, the widest variation being from 8.3 
to 10.6 or 2.3 per cent. Nebraska illustrates forcibly the effect 
of climatic conditions, especially rainfall, in relation to farm- 
ing and to credit conditions. In Minnesota there is a variation 
in the district averages for total cost from 6.9 per cent in the 
southeastern district to 11.4 per cent in the north central part 
of the state. Such a comparison indicates clearly the effect of 
temperature and soil conditions on farming and credit condi- 
tions. 

SHORT TIME LOANS TO FARMEES ON PERSONAL SECURITY— PER CENT 
DISTRIBUTION OF REPLIES RECEIVED ACCORDING TO INTEREST RATE 
REPORTED 



Geographic 
Division 
and State 



New England: 

Maine 

New Hampshire 

Vermont 

Massachusetts .. 
Rhode Island . . 
Connecticut 



Middle Atlantic: 
New Tork ... 
New Jersey . . 
Pennsylvania 



East North Central: 

Ohio 

Indiana 

Illinois 

Michigan 

Wisconsin 



West North Central: 

Minnesota 

Iowa 

Missouri 

North Dakota 

South Dakota 

Nebraska 

Kansas 



South Atlantic: 

Delaware 

Maryland 

Virginia 

West Virginia . 
North Carolina 
South Carolina 

Georgia 

Florida 



Per cent of total number of replies showing an interest 
rate of — 



5% 



7.1 
10.5 

4.S 



5.1 
16.7 

12. S 



3.3 
4.6 
0.6 
0.5 



0.5 
O.i 
0.3 



0.4 
0.4 



2.9 

0.8 



6% 


7% 


8% 


9% 


10% 


11% 


12% 


13% or over 


78.3 


8.7 


8.7 




2.2 




2.2 




85.7 


7.1 














89.5 
















90.4 


4.8 














83.3 


16.7 














88.2 
















93.8 


1.0 














83.3 
















84.6 


1.9 


0.6 












61.5 


20.3 


14.8 












37.6 


31.2 


26.1 




0.5 








39.0 


57.1 


1.6 


0.3 


1.3 








24.1 


64.5 


3.2 




2.3 


0.5 


4.1 


6.9 


44.9 


28.1 


15.7 


0.5 


1.6 








8.7 


13.5 


41.8 


6.2 


28.4 




1.0 




8.8 


28.0 


63.4 












11.0 


20.8 


63.4 


0.3 


2.7 




T.5 






1.2 


5.7 


1.7 


29.5 


4.0 


57.3 






1.6 


29.6 


3.2 


43.6 


2.7 


18.3 


1.0 


1.8 


8.2 


40.7 


5.0 


42.9 


0.4 


0.4 


0.4 


1.4 


6.0 


66.5 


4.9 


19.7 


0.4 


0.7 




100.0 
















94.3 




2.9 












82.6 


4.1 


9.9 


0.8 


1.7 








90.2 


2.0 


S.9 








2.6 




75.7 


4.7 


14.8 


0.7 


2.0 


1.4 




0.7 




3.0 


S2.8 


4.0 


7.1 




3.6 




O.T 


5.1 


51.1 


2.9 


18.2 


1.5 


U.7 


8.8 






3S.6 


9.1 


47.7 


2.3 


2.3 





CARL W. THOMPSON 



423 



SHORT TIME LOANS TO FARMERS ON PERSONAL SECURITY-PER CENT 
MSTRIWnON OF REPLIES RECEIVED ACCORDING TO INTEREST RATE 
K EPORTED— Continued 



Geographic 
Division 


Per cent of total number of replies showing an interest 
rate of— 


and State 


5% 


6% 


7% 


8% 


9% 


10% 


11% 


12% 


13% or over 


East South Central: 


45.0 

27.9 

2.1 

4.0 

1.3 
0.4 

4.0 
5.0 


7.1 
4.1 
1.4 
4.0 

"i.s 

2.3 

1.3 
2.1 
1.9 

6.3 

2.5 
8.0 
17.7 


34.3 
36.0 
36.5 
61.1 

7.2 
56.0 

4.4 
12.1 

2.7 
3.8 
12.8 
12.3 
4.3 
30.8 
50.0 

29.6 
57.3 
42.6 


1.2 
2.3 

2.0 

0.5 
4.0 

0.4 
2.0 

1.3 
2.1 

2.8 

12.5 

i.3 

9.9 


11.8 
26.7 
33.8 

26.2 

90.2 
29.4 
44.9 
69.9 

37.3 
64.6 
55.3 
42.4 
31.9 
30.8 
25.0 

42.0 
29.3 

17.7 


0.6 
0.7 

1.0 

2.2 
0.8 

1.3 

8.9 
10.6 

5.7 
8.5 
15.4 

3.7 


0.6 
17.2 

5.4 
19.4 
6.6 

58.7 
20.3 
12.8 
29.2 
48.9 
^.1 
6.3 

21.0 

'7!i 








2.3 






8.3 


Mississippi ■ 

West South Central: 




2.7 
1.0 






2.7 






28.2 






6.3 


Mountain: 
















4.2 






5.5 


New Mexico 




6.4, 


Utah 






Pacific: 
Washington 




1.2 















The reports on interest rates for each state have also been 
distributed so as to show the relative number of reports for 
each rate as indicated in exhibit 2. This illustrates in another 
way the degree of variation in interest charges within different 
states, also showing in each case the prevailing rate. 

What Causes Variation in Interest Charges? 

Let us now consider the more important factors which cause 
variations in interest charges, especially as between different 
localities or regions of the country. 

These may be summarized as follows : 

1. Climatic and soil conditions. 

2. Character of farming and farm population. 

3. Distance from financial centers. 

4. Character of accessible financial agencies. 

The effect of climatic conditions on interest rates is illus- 
trated by the figures already shown for Eastern and Western 
Nebraska. The contrasts noted within that state apply gen- 



424 MARKETING AND FARM CREDITS 

erally as between the sections of the corn belt having relatively 
adequate rainfall, and the semi-arid country farther west. The 
effect of differences in temperature and soil conditions on in- 
terest rates is shown in the comparison made between Southeast- 
ern and North Central Minnesota. 

There is no factor affecting interest charges on farm loans 
which is of greater importance than the character of farming 
and farm population. The best credit will always be extended 
to those farming regions where the farmers are known to meet 
their obligations regularly and promptly. This means that the 
advantages will rest with agricultural areas where the charac- 
ter of the population is well established and where a regular 
farm income is afisured from year to year. Preference will 
therefore be given to areas of a fairly stable as against a shift- 
ing or migratory population, since the dependability of borrow- 
ers can be most satisfactorily determined through experience 
and personal connections of long standing. Preference will 
also be given to areas of diversified agriculture as against one- 
crop territory, giving the "feed-food-and-cotton farmer" an 
advantage over the one-crop cotton farmer, and favoring the 
mixed grain and livestock farmer generally as against the 
wheat or other single grain crop farmer. Too much emphasis 
cannot be laid on the character of the farming population and 
on the importance of approved systems and methods of farm- 
ing, yielding dependable incomes, as a necessary basis for fa- 
vorable credit conditions, whether for personal or mortgage 
credit. 

Distance from financial centers clearly affects charges on farm 
loans. The figures for interest rates show a definite upward 
tendency as one proceeds outward from any of the important 
financial centers. How to overcome in some measure the handi- 
cap that mere geographical distance thus imposes upon the 
more remote farming areas of our country is one of the most 
difficult problems in rural credits. 

Another factor of far-reaching importance in its relation to 
the charges made on farm loans is the character of financial 
agencies supplying such loans. Let us note especially the part 
played by existing banks in this connection. Exhibit No. 3 
shows the estimated total short time loans supplied to farm- 
ers in each state by existing banks ; and also the amounts fur- 
nished by national banks and by banks other than national. 



CARL. W. THOMPSON 



425 



SHORT TIME LO'ANS TO FARMERS MADE BY BANKS 



Geographic Division 
and State 



United States 



Geographic divisions: 

New England 

Middle Atlantic 

East North eCntral. 
West North Central. 

South Atlantic 

East South Central 
West South Central. 

Mountain 

Pacific 



New England: 

Maine 

New Hampshire 

Vermont 

Massachusetts . . 
Rhode Island . . . 
Connecticut 



Middle Atlantic: 
New York . . . 
New Jersey . 
Pennsylvania 



East North Central: 

Ohio 

Indiana 

Illinois 

Michigan 

Wisconsin 



West North Central: 

Minnesota 

Iowa 

Missouri 

North Dakota ... 
South Dakota . . . 

Nebraska 

Kansas 



South Atlantic: 

Delaware 

Maryland 

Virginia 

West Virginia . 

North Carolina 

South Carolina .. 

Georgia 

Florida 



East South Central: 

Kentucky 

Tennessee 

Alabama 

Mississippi 



Estimated total amount 
(Thousands of dollars) 



Per cent of loans 
made by — 



All 
banks 



West South Central: 

Arkansas 

Louisiana 

Oklahoma 

Texas 



1,600,970 



16,890 
67,400 
S2S',030 
583,120 
151,220 
76,530 
204,310 
86,650 
93,820 



5,000 
1,050 
7,010 
2,370 
80 
1,380 



^,990 
7,480 
35,930 



43,600 
64,930 
138,140 
3.31,580 
44,780 



79,120 
187,070 
67,040 
46,070 
40,480 
S>,60O 
83,740 



6,260 
18,470 
29,770 

8,310 
21,280 
19,820 
41,430 

5,810 



29,200 

23,560 

15,250 

8,520 



10,960 

12,360 

51,260 

129,730 



National 
banks 



765,290 



8,500 
47,770 
141,210 
2461,600 
47,150 
30,080 
137,700 
52,270 
58,920 



600 

3,360 

2,280 

10 

1,300 



17,750 

6,240 

23,780 



22,130 

29,050 
72,560 
7,590 
9,88) 



32,480 
72,230 
18,610 
23,340 
14,260 
47,990 
87,780 



1,450 
6,440 
14,220 
1,990 
8,900 
5,500 
7,080 
1,570 



16,940 
5,710 
5,240 
2,190 



4.010 
33,260 
96,550 



Other 
banks 



844,680 



8,300 

19,630 

183,820 

341,430 

104,070 

46,460 

66,610 

34,380 

39,900 



4,140 
360 

3,650 
90 
70 
80 



6,240 

1,240 

12,150 



21,470 
35,880 
65,580 
25,990 
34,900 



46,640 
114,840 
48,430 
22,730 
26,220 
37,610 
44,960 



4,810 
12,030 

15,550 
6,320 
12,380 
14,390 
34,350 
4,240 



12,260 

17,&50 

10,010 

6,330 



7,070 

8,850 

18,010 

33,180 



National 
banks 



47.5 



50.3 
70.9 
48.4 
41.9 
31.2 
39.3 
67.4 
60.3 
57.5 



17.2 
65.7 
47.9 
96.2 
12.5 
94.2 



74.0 
83.4 
66.2 



50.8 
44.7 
52.5 
22.6 
S.l 



41.1 
38.6 

27.8 
50.7 
35.2 
56.1 

45.7 



23.2 
34.9 
47.8 
23.9 
41.8 
27.7 
17.1 
27.0 



58.0 
24.2 
34.4. 

25.7 



35.5 
32.4 
64.0 
74.4 



Other 
banks 



52.5 



49.7 
29.1 
56.6 
58.1 
68.8 
60.7 
82.6 
39.7 
42.5 



82.8 
34.3 
52.1 

3.8 
87.5 

5.8 



26.0 
16.6 
33.8 



49.2 
55.3 
47.5 
77.4 
77.9 



58.9 
61.4 
72.2 
49.3 
64.8 
43.9 
54.3 



76.8 
65.1 

52.2 
76.1 
58.2 
72.3 
82.9 
73.0 



42.0 
75.8 
65.6 
74.3 



64.5 
67.6 
35.1 
25.6 



426 



MARKETING AND FARM CREDITS 



SHORT TIME LOANS TO FARMERS MADE BY BANKS— Continued. 



Geographic Division 
and State 



Mountain: 

Montana . . 

Idaho 

Wyoming . . 
Colorado . . 
New Mexico 

Arizona 

Utah 

Nevada 

Pacific: 

Washington 

Oxegon 

California , 



Estimated total amount 
(Thousands of dollars) 



Per cent of loans 
made by — 



All 
banks 



20,300 

13,290 

10,010 

19,910 

4,500 

6,350 

7,010 

5,280 



•24,510 
17,020 
52,290 



National 
banks 



S,640 
7,090 
8,400 
13,880 
3,820 
2,400 
5,090 
2,950 



7,800 
8,370 
37,750 



Other 
banks 



11,660 
6,200 
1,610 
6,030 

680 
3,950 
1,920 
2,330 



16,710 
8,650 
14,540 



National 
banks 



42.6 
53.3 
83.9 
69.7 
84.9 
37.8 
72.6 
55.9 



31.8 
49.2 



Other 
banks 



57.4 
46.7 
16.1 
30.3 
15.1 
62.2 
27.4 
44.1 



68.2 
50.8 
27.3 



It appears that the banks of the United States furnish ap- 
proximately $1,610,000,000 in short time loans to farmers, of 
which national banks supply $765,000,000 and banks other than 
national (state, private, and savings banks, and trust compa- 
nies), about $845,000,000. This means that our 7,420 national 
banks furnish 471/2 per cent and our 18,456 other banks supply 
521^ per cent of the total short time bank loans to farmers. 

The relative importance of national banks as compared with 
others in relation to short time farm loans varies considerably 
in different parts of the country. In New York national banks 
furnish almost three-fourths of the total short time farm loans 
from the banks in the state, while other banks supply a trifle 
more than one-fourth. Similarly, in Pennsylvania two-thirds 
of the farm loans on personal or collateral security are made by 
national banks and one-third by other banks. 



Where National Banks Do Not Dominate Farm Loans 

On the other hand, in "Wisconsin onl}- 22 per cent of the farm 
loans from banks are supplied by national banks and 78 per 
cent by other banks. In Michigan, less than 23 per cent is 
loaned by national banks and more than 77 per cent by other 
banks. In Missouri less than 28 per cent of these farm loans 
are furnished by national banks and more than 72 per cent by 
other banks. In Minnesota, national banks supply 41 per cent, 
while other banks furnish 59 per cent of these loans to fanners. 
In Iowa less than 30 per cent of the bank loans to farmers on 



CARL W. THOMPSON 427 

personal or collateral security are made by national banks, 
more than 61 per cent being supplied by banks other than na- 
tional. 

The Iowa banks supply farmers with short time loans 
amounting to more than $187,000,000, this amount exceeding by 
a considerable sum that supplied by the banks of any other 
state. 

Iowa is fairly honeycombed with relatively small stock sav- 
ings banks, the state law authorizing such banks to be incor- 
porated with a capital of $10,000. These stock savings banks 
furnish fully one-third of the total short time bank loans of the 
state made to farmers. 

In typical states of the old cotton belt we find that by far 
the largest portion of short time farm loans is made by banks 
other than national. Thus in South Carolina over 72 per cent 
of sucJi loans are made by banks other than national and less 
tha 28 per cent by national banks. In Georgia almost 83 per 
cent of the loans are made by banks other than national and 
about 17 per cent by national banks. In the states of Tennes- 
see and Mississippi, national banks supply only about one- 
fourth, while other banks furnish three-fourths, of such loans. 
In Alabama and Louisiana national banks furnish less than one- 
third and other banks fully two-thirds of such loans. On the 
other hand, in Oklahoma the national banks furnish almost two- 
thirds, and other banks one-third, of such loans, while in Texas 
national banks supply three-fourths of these short time farm 
loans and other banks about one-fourth. In nearly all the 
Rocky Mountain States the relative importance of national 
'banks is considerably greater than that of other banks. In 
Utah, 73 per cent of the loans are from national banks and 
"27 per cent from other banks. In Colorado 70 per cent are 
from national banks and 30 per cent from other banks. In 
Wyoming 84 per cent are from national banks and 16 per cent 
are from other banks. 

In general, our data point to the conclusion that in the older 
cotton growing states, as well as in the grain growing sections 
of the country, a considerably larger portion of the loans fur- 
nished to farmers during the period of production are supplied 
by state, private and savings banks and trust companies, than 
by national banks, while on the other hand, in the cattle terri- 
tory, including Oklahoma, Texas and the Rocky Mountain 
states, by far the larger portion of the bank loans are furnished 
l)y national banks. They also show that for the country as a 



428 MARKETING AND FARM CREDITS 

whole a larger portion of the loans on personal or collateral se- 
enrity are furnished by state, private, and savings banks, and 
trust companies than by national banks. 

Keen Need for Improvement in South and West 

The charges on short time loans to farmers, as cited in the 
earlier part of this paper, clearly indicate the need for improve- 
ment, especially in the South and West. There are the sections 
where local capit-al is relatively scarce and where there is the 
greatest need of connecting the farmer with outside or distant 
sources of capital. Improvement in loan facilities, therefore, 
should include proper encouragement for the creation of insti- 
tutions for the accumulation of local savings. And it should 
also include a better means of contact between the farmer and 
outside or distant sources of capital. 

Our federal reserve system will undoubtedly serve as an im- 
portant step in connecting farmers with outside capital, espe- 
cially because of the opportunity afforded for the discounting 
of agricultural paper. At the same time, it is clear from the 
study of present sources of short time loans to farmers that 
there is a large portion of our farming population that is not 
in a position at present to take advantage of the federal reserve 
system. It seems especially important that the benefits of the 
discount feature of the federal resei^ve banks should be so ex- 
tended as to be within reach of farmers near to^^^lS and villages 
where no national banks can now be profitably organized. Un- 
less other smaller banks can be induced to come into the federal 
reserve system, it may be found advisable to permit national 
banks to create branches, without capital stock, in the smaller 
to-s\nis and villages. 

The encouragement of suitable savings institutions for the 
better accumulation of local capital might well be left to the 
several states. .Aside from a proper adaptation of such local 
savings banks as are now found in large numbers in certain 
regions, especially in Iowa and New England, it would seem 
that each state should provide a law permitting the organization 
of cooperative credit associations. 

Thus far credit union laws have been enacted in 7 states, as 
follows: Massachusetts (1909), Texas (1913), Wisconsin 
(1913), New York (amended 191-4), North Carolina (1915, 
South Carolina (1915), and Oregon (1915). These associations 
are designated ''Cooperative Credit Associations" in Wiscon- 
sin, and ''Credit Unions" in the other 6 states. 



CARL. W. THOMPSON 429 

Twenty-six credit iinions have been organized under the statute 
of Massachusetts. These, however, are nearly all found among 
the working classes in towns or cities. Only one credit union 
has been organized among farmers in Massachusetts. The Jew- 
ish Agricultural and Industrial Aid Society has organized 18 
credit unions in this country, including 8 in New York, 5 in 
New Jersey, 4 in Connecticut, and 1 in Massachusetts. This 
society is attempting to have its associations in New York re- 
organize under the amended law of that state. I have no knowl- 
edge of any credit associations organized in Texas, Wisconsin, 
Oregon, North Carolina or South Carolina. 

In formulating a state law with reference to cooperative 
credit associations, it appears that existing statutes for such 
states as Massachusetts, New York, Texas, Wisconsin, Oregon, 
North and South Carolina could all be modified to advantage 
in order to meet the needs of rural conditions. While most of 
these statutes have been framed with the apparent intention of 
serving the needs of rural personal credit, they have all been 
patterned in the main on the Massachusetts law, and are better 
suited to the needs of the working classes in towns or cities 
than they are to the needs of farmers. 

Improvements of Existing Laws Needed. 

In the existing statutes there are 3 requirements, especially, 
which could be modified to advantage : 

1. All of these laws make it necessary to organize the 
local associations with capital stock, 

2. The placing of deposits with associations is limited to 
members. 

3. The funds of the associations are restricted to indi- 
vidual loans. 

It would seem that the 3 provisions above mentioned should 
be modified as follows: 

1. Cooperative credit associations should be allowed to or- 
ganize either with or without capital stock. 

2. Such associations should be permitted to receive de- 
posits from anybody, whether a member or not. 

3. The associations should be allowed to employ their 
funds collectively for common agricultural needs such as 
collective purchasing. 



430 MARKETING AND FARM CREDITS 

It is believed that farmers in certain localities eonld be in- 
duced to organize cooperative credit associations on the 
strength of such liability as they would be willing to assume, 
without contributing anything for capital stock. Among work- 
ers in cities who receive wages periodically, the plan of having 
shares of stock presents no hardship or handicap. Among 
farmers whose income is seasonal and whose interest in organ- 
izing is mainly as borrowers, associations without capital stock 
might serve the purpose better. 

There appears to be no reason why the deposits with such an 
association should be restricted to members. There might be 
in a given neighborhood a number of people who Avould be 
willing to deposit funds with such an association, but who have 
no special reason to become members of the association. If co- 
operative credit associations are to succeed they should have 
the advantage of all the deposits which they can obtain. 

The importance of allowing a cooperative credit association 
to use its funds for common agricultural needs as well as for 
loans to individual members cannot be over-emphasized. There 
are many Avays in which an association as such might use its 
funds collectively for common agricultural purposes, as illus- 
trated in the case of collective purchasing. The statute should 
therefore be so drawn as to permit an association to use its 
funds in this way if it desires to do so, as Avell as to make loans 
to individual members. 

Whenever borrowers desire to form guarantee associations to 
endorse the loans of members, proper encouragement should be 
given for this purpose. Such associations might prefer to omit 
the deposit feature noted above, but be similar in other respects 
to cooperative credit associations. 

There is other desirable legislation of great importance to 
the farmer and which directly affects his means of obtaining 
credit. Examples of this are found in such laws as would have 
a bearing on the standardization of grain and cotton, the ware- 
housing of these products and the encouragement of uniformity 
in warehouse receipts. All such matters are important in de- 
termining how far the farmer can utilize his products to ad- 
vantage as a collateral for loans. 

Safe Farming Essential to Credit 

Aside from improvement in financial agencies, whether under 
state or federal law, and aside from other legislation affectin£? 
opportunities for farm credit, it should be remembered that 



CARL W. THOMPSON 431 

auTtliiug- tending to improve the status of the farmer and his 
farming is of vital importance in its relation to rural credits. 
"We need to keep clearly in mind in all rural credit discussion 
that a stable sj'stem and method of farming is a necessary basis 
for favorable credit conditions ; and that the personal character 
and business ability of the farmer himself, as well as his method 
and system of farming must necessarily be considered. In 
fact, everything that leads to better farming will also be help- 
ful in improving farm credit. This means that all the work of 
the various experiment stations, state departments of agricul- 
ture, agricultural schools and colleges, and of the United States 
Department of Agriculture, should contribute, at least indi- 
rectly, toward the betterment of rural credits. 

In closing permit me to repeat certain conclusions set forth 
in this paper : 

1. It is clear that unreasonable charges prevail in many lo- 
calities, especially in the South and West, in connection ^dth 
farm loans on personal or collateral security, and that there is 
therefore need for improvement in the present facilities for 
providing the farmer with credit during production. 

2. The opportunity for farmers to obtain connections with 
outside or distant capital should be improved through an ex- 
tension of the rediscount service of the federal reserve system 
to smaller towns and villages — possibly by permitting national 
banks to establish branches. 

3. Financial legislation is needed in the several states to pro- 
vide for suitable local savings institutions and for cooperative 
credit associations among rural borrowers. These cooperative 
credit associations should be permitted to organize either with 
or without capital stock; they should be allowed to receive de- 
posits from anyone whether a member or not ; and they should 
be allowed to devote their funds to common agricultural pur- 
poses, such as collective purchasing, as well as to make loans 
to individual members. Proper encouragement should also be 
given borrowers desiring to organize guarantee associations to 
endorse the loans of members. 

4. While certain forms of specific financial legislation, both 
by federal and by state governments, appear desirable in the 
interests of improved rural credits, it should be remembered 
that the problem also involves the question of the character of 
the farming population and its system and method of farming, 
and that all improvements along such lines contribute to the so- 
lution of the problem of rural credits. 



432 MARKETING AND FARM CREDITS 



THE LANDLORD AND TENANT IN PRO- 
DUCTION IN THE NORTH 

Charles S. Adkins 
President, Illinois Livestock Breeders' Association 

I am a tenant fanner myself and I have been occupying a farm 
of 560 acres in Illinois for a good many years and have lived on 
the same farm for 23 years, making my bread and butter there. 

The man with whom I am in partnership in the stock busi- 
ness and the production of hay, grain, etc., has been in business 
with me for 23 years, and we have never had a scratch of a 
pen in any way in the way of a contract between us. We have 
talked over things for 23 years, and have put into effect a sys- 
tem and plan that is mutually fair to both of us, and then we 
proceeded upon that basis and system of cooperation for the 
mutual advantage of us both, and with the end in view of main- 
taining the farm so that our posterity might reap the benefit of 
it and go on living and prospering after we have retired to 
some other country. 

And in addition to that, I have participated in the affairs 
of my community the same as has any other citizen and I be- 
lieve that I enjoy the distinction of being the only farmer that 
was ever speaker of the house in the Illinois legislature. 

So you will pardon me in referring to myself in informing 
you in what capacity I daily operate wihen I am at home and you 
will judge for yourselves as to whether I am competent to discuss 
the matter under discussion or not. 

The landlord and tenant proposition in the com belt, of 
which, of course, I am most familiar, includes a large part of 
Illinois, Indiana, Ohio, Iowa, Kansas, Nebraska, Dakota and 
Minnesota. About a little less — I don't know the exact figure 
— but a little less than 50 per cent of the farms is occupied by 
tenant farmers. A great number of the people operating the 
land are tenant farmers. Now, there are different classes of 
landlords. 

Speculation and Rise of Land Valuation 

We have, first of all, a factor that has been a very active one 
in the last 25 years. In 25 years in the com belt in Illinois, the 



CHARLES S. ADKINS 433 

fair value of land has increased from along about, from $18 to $45 
an acre, up to about $175 to $250 per acre. 

So that the speculators — the speculative landlord has been a 
very large factor in retarding the development and advance- 
ment of agriculture in the corn belt here. 

You can see from this, and very clearly, that buying land in 
Illinois 25 years ago was a rather good investment. The joint 
farm next to me was bought, less than 30 years ago, at $18 an 
acre, and that same farm can now be sold at $200 an acre. 
That permits, in a great many instances, of rather heavy wa- 
tering of the stock. Now, I do not believe that there is a 
stock company or a transportation company in this country, or 
a manufacturing company or establishment in the land, that 
could have anything like that much water — that could have 
knocked the bung out — that would not have had to run their 
water in with a spiggot that fast. I think that they would 
have had to knock the bung out to have watered it as much 
as the land has been watered in that length of time. 

Now, that class of men has been a detriment to the farm 
interests, and to the landlords' interests, and to the general 
public's interest, during all these years. Why? Because the 
speculator has bought the land without any view of ever 
making it the source of an income, as far as its producing 
power was concerned. Why? He bought it purely on specu- 
lation. 

While he was holding that land he was mining it for all it 
was worth and for everything possible to get out of it. He 
would employ a tenant in many cases, and in a certain per- 
centage of the eases, without any idea as to that tenant's quali- 
fication for maintaining the soil, or for that tenant's qualifica- 
tions or adaptability for that community,— to help build up the 
community, but simply as to his power to mine the soil and get 
the most possible out of the ground for that present year, be- 
cause of the fact that he wanted to have all that he could get 
out of it while holding that land for speculation, and in turn, 
turn around and dump it on some other men for a large profit 
when he got through with the land. 

Two Types of Tenants 

Now, there are the 2 classes of those tenants. One class grows 
very little, for the standard of their living is very low. He 
cares very little for the standard maintained in his household. 

28 — M. F. C. 



434 MARKETING AND FARM CREDITS 

He gets along and gives his family very little sehooUng ad- 
vantage. I know Avhat I am talking abont because 1 have a 
neighbor today who has o sons, the same as I have, and out 
of those 5 sous, not one passed the third grade in sehool. 
The oldest son, who is going out to do for himself today, can- 
not write his own name, — and is a young man 25 years old. 
But that tenant farmer has sacrificed every comfort for the 
purpose of wrenching from the soil all the money he could get, 
and in turn buy the farm. 

In the course of a few years he will have it all right, but he 
has paid too big a price. 

Now% that tenant looks out for his own financing. He 
finances his own business on his own basis of his own business 
ability and energy, and he does not ask anything of anyboci>'. 
That man has 20 head of horses, the best in the community, 
and if he wants to buy a team of horses and does not have any 
money, his credit is always go<id. He can go to the bank and 
get all the credit he wants, within reason, — he can borrow 
$1,000 or $2,000, and they know^ that he is good for it. Why? 
Because, they know that he will pay it and he will sacrifice 
everything a human can and that he has a right to enjoy, for 
the purpose of paying the debt. 

And so, he goes along and buys a farm, and has not asked 
anything of anybody, and his sole security for financing his 
business is his energy, and his devotion to mining the soil and 
saving the money, and the financial fellows recognize that 
man's ability in that line and they are not afraid to lend him 
money. And, if he has a few years, he has gotten enough prop- 
erty accumulated to make him a proper security for all the 
money he wants and more if he wants to borrow it. 

On the other hand, we have other men who have the same 
ideas as other men. They become a p>art of the community in 
which they live. They participate in all the affairs of the com- 
munity. There is a class of us that there is not a public enter- 
prise that comes along that w*e do not take hold of it and be- 
come a factor in shaping the affairs of that community. 

As an illustration, we adopted the idea of having a high 
school district in my community not long since. I refer to our 
connuunity. because that applies all through the corn belt. We 
have a lot of absentee landlords there. So that the children 
of that community, and who grew up in this connuunity would 
be eligible to that institution and go through our high schools, 
the tenants who believed in building up citizenship and who 



CHARLES S. ADKINS 435 

are permanent fellows and expect to remain in that community, 
got out and put their shoulders to the wheel to bring about 
that condition which we wished. 

Absentee Landlords Fight Progress 

The absentee landlord came in in most instances, and, fig- 
uratively speaking, put a gun to this man's head and said, 
"do not do this." But we got together and brought about 
this result. That is one of the common things we have to con- 
tend with in the community. The absentee owner is not in 
favor of these things, and we also have this class of tenants. 

But there are other kinds of landlords. Take, for instance, 
the man I am in business with and have been for a long time. 
I got married and moved on his farm on a Thursday and on 
Sunday morning he introduced me to a 4 mule team and 160 
steers. That was 25 years ago. He has a splendid farm and 
he was raised on a farm and lived on a farm all his life and 
operated one all his life. 

It is a stock and grain farm. I had not been able to buy 
my teams and he arrived at it in that way, and I find that there 
are a large number of men who own land in the North who 
are that class of landowners and that take great pride in their 
farm matters. They see some fellow like myself, who is am- 
bitious and able to do things, and they take him up and go 
along and give him a show. 

In my instance, he said, "I have the cattle to take care of 
and I will turn you over the teams and let you raise this corn 
and give you 121^ cents a bushel to raise it. I will pay all the 
expenses of repairing the harnesses and keeping up the teams, 
and you furnish the labor." 

So I have the cattle until the time to put in the crops and 
then when I have gotten the crops in and in the shock, I go on 
feeding the cattle. In about 2 or 3 years I got too rich to do 
that and then I bought my own teams and went into partner- 
ship with him, as I have told you. 

But we have a large number of men in this country who are 
land owners, and who are interested, not only in the present 
income, but in the lands being in such condition, that is, poster- 
ity may get something from it, and they take the matter up with 
their tenant, and if the tenant hasn't sufficient capital to take 
care of it, and has not his own livestock, and if his tenant is not 



436 MARKETING AND FARM CREDITS 

of such a financial standing that he is able to carry it, the land- 
lord backs him and furnishes the money to do this. 

And as they go on on that basis, which is fair and equitable 
to each of them, and then they cooperate with a view of carrying 
out that system of cooperation or that plan, and to the mutual 
advantage of each of them, and to^the upbuilding of the farm. 
Now, that is the other class. 

Then we have still another class of landlords: They live on 
the very small farms, and they attempt to retire and live off of 
the income of those farms, and they are the poorest class of ten- 
ants, and landlords that we have, because they are both grabbing 
off all they can get from the farm, and they are choosing the 
hardest way to live. The result is that all 3, the landlord, 
tenant and the farm, grow poor together. 

Now, it seems to me that the problem that is broached and 
the problem that we will have to take cognizance of is this: 
You have a great, national conference called here, with a view 
of doing what ? Shortening the distance between the farmer and 
the consumer. That is what it all means. There has been a 
tendency in the past, — and I haven 't heard it touched on in any 
of these meetings, — that affects this system of landlord and ten- 
ant, — that we may better this system and may establish a system 
in this country. It vitally affects it, and in turn affects the 
conditions of agriculture in this country. It is this : 

A Poverty of Remedies 

In the last 30 years, as I have already stated, as a speculative 
proposition, land has been a very desirable thing to buy. We 
have bankers, manufacturers and professional men, and the 
other fellows that have come back to the farm with their money — 
looking for a safe investment for their capital. They have in- 
vested it in the land. Banking concerns, in times gone by, took 
the farmers' money and bought the land with it. That is aU 
legitimate, we are not criticising it. Buying it and having the 
money placed out at work, and with the increase in the price of 
land the com belt, it has brought an enormous income, and added 
to their resources until there is a large amount of this land that 
has fallen into the hands of those fellows. 

The Right Kind of Competition 

That is competition, and it is legitimate competition, and we 
are not criticising any man for seeking and finding a safe in- 



ALEXANDER E. CANCE 437 

vestment for his earnings. That competition is keen today, and 
he has become a competitor with what would be the real farmer 
of the country, for the soil. Now, of all the remedies that I have 
ever heard proposed to make it easier to reach this end that 
you are talking about financiny — ^to become a landholder — it does 
not seem to me that I have ever heard a reasonable and feasible 
proposition submitted. I have had a great deal of experience 
in legislative matters in my state, and I have had an opportun- 
ity to confer with the lawyers of great business interests, inter- 
ested in my state, especially with the transportation lines, and I 
think the tendency is in the right direction today to bring about 
a proper condition in this country, and instead of having a land- 
less people, we will have a land-owning people. Instead of 
1,500,000 on this land, we will have less than 50,000 in the next 
30 years, if the present tendency goes on as it has. Let us bring 
about a change. 



FINANCING LANDLORD AND TENANT IN 
PRODUCTION IN THE SOUTH 

Alexander E. Cance 

Professor of Agricultural Economics, Massachusetts Agricultural 

College 

The claims of the author of this paper to discuss expertly the 
landlord and tenant problem in the South are based on 3 
separate investigations made for the University of "Wisconsin, 
the United States Census Bureau and the United States Immi- 
grant Commission, into the landlord and tenant situation in 
JMississippi, Texas, Arkansas and Louisiana. Moreover, a 3 
years' residence in the Eastern South and a number of visits to- 
almost every portion of the cotton kingdom gave him an oppor- 
tunity to know the South somewhat intimately. These studies 
were made in the field going right through the cotton row and 
over the actual plantation on foot and mule-back, visiting the 
tenants and the small owners as well as the large planters on 
their plantations and in their homes. While some of the facts 
presented may be a few years old, the author has kept as closely 
in touch w;ith the situation as possible and speaks with some as- 
surance on all points offered for consideration. 



438 MARKETING AND FARM CREDITS 

A Southern AgTicultural Problem 

In some respects, it is very difficult to generalize on southern 
conditions, because these conditions vary a great deal in differ- 
ent parts of the South. The problems of the so-called "bot- 
toms" and "black lands" are very d;ifferent from the problems 
of production in the uplands. The weevil country and the im- 
mune sections of the South differ greatly in this aspect of the 
cotton situation. In many instances, different parts of the same 
county bring to light very different problems. 

Nevertheless, everywhere in the South, there are some points 
of similarity. In the first place, the system of land tenure which 
provides for landlords and tenants in production is common 
everywhere. In the second place, the one-crop system is almost 
universal in the cotton belt and pretty general in the regions 
where rice, sugar and vegetable crops are raised. All over the 
South, th/cre are renters, croppers and small owing operators. 
In the third place, the use of credit obtained from various agen- 
cies is almost universal in crop production. The crop mortgage 
to secure advances of supplies ;is general and the rent lien is a 
feature of agrarian legislation in the Southern States. There 
are other points of similaritj^ but these, perhaps, are sufficient 
to show that there is a southern problem. 

Economic Characteristics of Cotton 

Cotton is the all-important crop and cotton has certain inher- 
ent characteristics: (1) It is a 13-months crop, which really re- 
quires 150 to 170 days of actual labor at more or less regular in- 
tervals throughout the year. (2) Cotton is a poor man's crop. 
It requires verj^ little capital and a small acreage per fam{ily. 
(3) It will stand a great deal of abuse and neglect but it will 
respond marvellously to intelligent cultivation and careful man- 
agement. (4) It is not a heavy yielding crop. As grown, a good 
average yield is one-half bale per acre, somewhat more than the 
United States average. A good crop is 6 to 10 bales per mule 
and often a two-mule farm produces less. A fair gross retam 
is $300 to $600 per mule, but the variation in returns is tremen- 
dous. (5) Cotton has very good marketing characteristics. It 
is easily stored, handled in comparatively large units and divided 
readily, is in universal demand and can be moved with little loss. 
(6) It is an excellent basis for credit since it does not deter- 
iorate, is a good insurance risk, and can be quickly turned into 



ALEXANDER E. CANCE 439 

liquid capital. Nevertheless, except iii rare cases, it is very much 
easier to get an advance of money on a growing or unplanted 
crop of cotton that it is on baled cotton ready for market in a 
farm storage or warehouse. From the beginning, cotton has 
been ra|ised under a one-crop system, a system that has de- 
stroyed the land, discouraged the home-builder and kept large 
sections of the South in permanent poverty. 

I need not say that a one-crop cotton system cannot sustain 
itself permanently. Fertility is exhausted ; rotation of crops 
is not possible ; livestock finds little or no place in the scheme ; 
no source of current income is provided ; a self-sustaining ag- 
riculture cannot be practiced and years of trial have proved the 
inability of the system to build up permanent, intelligent, and 
prosperous rural citizenship. 

Forms and Extent of Tenancy 

In this day of our Lord, there are, from the southern farmers ' 
standpoint, 3 methods of land tenure — ownership, rent-tenancy, 
and share-cropping. There are 4 common methods of working 
the soil open to the landlord, — with his own family, wdth wage 
hands, by means of croppers or by renting to tenants. The 
wage hands receive a. money wage weekly, monthly or yearly 
with some variations in detail. The cropper furnishes nothing 
but his labor, and receiives one-half of the proceeds of the crop, 
his house rent, garden, etc., as his wages. The renter in the up- 
lands of the South may be an independent manager and capital- 
ist, just as we find him in the North. In the alluvial cotton re- 
gion, he is only another sort of laborer, with a mule and wagon 
of his own. There are all sorts of local and incidental modifi- 
cations of these systems but the general relations are as stated. 

In the so-called Southern States, there are 3,097,547 farmers. 
Thirty-one and seven-tenths per cent of them are croppers or 
renters on shares ; while 14.6 per cent are tenants for cotton or a 
fixed rent. One and three-tenths per cent are a combination of 
cotton and share, and, 49.8 per cent are owners. In Mississippi, 
a typical southern state, there are 274,382 farms. One-third 
(33.6 per cent) of them are operated by their owners and two- 
thirds (66.1 per cent) by tenants, of whom two-fifths (38 per 
cent) are cash tenants and three-fifths (59 per cent) are either 
croppers or share renters. 

Tenancy is increasing throughout the South; in some states 
very rapidly. 



440 MARKETING AND FARM CREDITS 

A very large percentage of these are one-crop farmers ; a great 
many of them are speculators either in land or in cotton. From 
90 to 99 per cent of the one-crop farmers, excepting always those 
of foreign antecedents, are borrowers. 

Where there are tenants there are landlords. There are at 
least 2 distinct classes of these — those who live on their own 
plantations and direct their farming operations, and those who 
live in town, either near the plantations or at some distance, 
and earn their daily bread as lawyers, bankers, merchants, doc- 
tors, preachers or railroad men, and look upon agriculture as 
an incidental source of revenue rather than an investment to 
be taken seriously. The indifference of certain southern 
planters is amazing. I could name instances in which planters 
had not visited their plantations, a few miles distant, for years. 

Even those who are most optimistic must concede that nearly 
all the croppers, white and black, are ignorant and unambitious, 
that comparatively few of the renters have sufficient capital 
and enterprise to carry on production intelligently and scien- 
tifically, and that many of the small landowners are not ad- 
vanced agriculturists. Until within recent years, although we 
have had agricultural preachers and prophets without end, 
very few of the southern planters gave much heed to their say- 
ings. No attempt is made to diversify crops or introduce new 
systems of agriculture unless the farmers are driven thereto by 
the boll weevil or the low prices of cotton. 

Other facts which greatly complicate the whole productive 
problem are that renters and croppers are a shifting and often 
a shiftless class, that very few of their tenant leases or rent 
contracts run for longer terms than 1 year, that even under the 
very best conditions one-third to one-half of the tenants move 
every year. 

A third complication is racial. In the black lands, the ne- 
groes outnumber the white tenants. In the uplands, there are 
more whites. In any case, there is little or no affiliation be- 
tween them. 

Borrowing for Production is Chronic 

Borrowing is an old habit in the South. Before the war, land 
was not of much value, but planters operated on the security 
of their slaves, and cotton factors were willing to make ad- 
vances on the prospective shipments of cotton. After the war, 
land was still valueless but the slaves were gone. Nobody had 



ALEXANDER E. CANCE 441 

enough ready money to make a crop or pay wages. For this 
reason, the planter offered a share of the crop as wages and pro- 
cured money for current expenses by giving a mortgage on the 
growing or unplanted crop. A few cotton growers have been 
able to pay off their first mortgage and save enough to pay 
running expenses 9 months in advance, but ever since 1865, 
the ordinary cotton grower has been one lap behind. The 
mortgage has been paid only by giving another mortgage to 
pay the first one. In the autumn, he borrows for the winter, 
in the spring he arranges a loan to carry him through the 
fall. Cotton is a staple easily and generally raised, but the 
yield and the price fluctuate greatly. The cotton grower is 
something of a speculator and he doesn't catch up. 

The southern tenant borrows to pay for making a crop. 
His advances are for meat and meal, mules and mule feed, to- 
bacco, molasses and general living expenses, A great many 
loans are for $50 or less. Perhaps $100 to $200 will cover the 
individual loan of most of the renters or croppers for a year. 
Since the loan is necessary to the making of a crop, and since 
the crop is harvested only in the fall, the loan must be made in 
the spring for a period of 6 to 9 months. If any renter desires 
funds for buying stock, it is probably necessary that the loan 
should be for a term of 2 or more years. Nevertheless, the 
ordinary method in many sections is to buy mules on time in 
the spring, and let seller recover them in the fall. 

Bases of Credit 

The fundamental bases of credits are the ability and the 
willingness to pay. Money should be invested so as to pay 
back both interest and principal. In other words, any loan 
should be for productive purposes. A loan for consumption 
cannot pay for itself. Payment must be made from some other 
productive enterprise or from previously stored-up capital. A 
productive enterprise is a good investment provided the bor- 
rower is willing to pay. A borrower should be honest, in- 
dustrious, sober and enterprising. 

On the other hand, if the enterprise is speculative, the risk 
is great and, consequently, the interest or rather the insurance 
charge to the renter must be high. If the loan is not for pro- 
ductive purposes, the security offered must be very good, both 
in property and in personal integrity. Unfortunately, a large 
percentage of southern farmers is weak on both scores. First, 



442 MARKETING AND FARM CREDITS 

they are not personally men of high productive capacity, in- 
tegrity or enterprise. Second, with ordinary methods, cotton 
growing is not uniformly productive and the borrower has few 
chattels and little or no real estate to offer as security. 

It must he said that commercial loans in the South bear a 
comparatively high rate of interest. In fact, the interest rates 
increase as one moves southward from Washington to Texas. 
Eight per cent per annum is at present considered a fair com- 
mercial rate. Loans to land-owning farmers of the better sort 
average from 10 per cent to 12 per cent near and west of the 
Mississippi river. Loans to croppers and renters and land- 
owners of the more ignorant and shiftless sort run from 10 per 
cent or 12 per cent or 20 per cent or more per annum. In many 
instances, these rates are exorbitant; in others they represent 
only a reasonable interest for the great risk incurred. 

The Tenant is a Poor Credit Risk 

The croppers are a shifting, roaming set ; both white and 
black are usually unreliable and, of course, have no property 
and are utterly dependent upon the crop of the present year 
and the credit extended to them for support. In the rich bot- 
tom lands, they always work under an overseer upon a crop 
that is always in the control of the landlord, and which is 
planted, cultivated and picked under supervision. The mules 
are owned and fed by the landlord; the day is begun and 
ended under the orders of the landlord; the tools, the cabin, 
the fuel and the necessities of life are provided and super- 
vised by the landlord. The cropper depends on his landlord 
for food, for shelter, for a doctor, for a lawyer, for a school, 
for labor. He works about 160 days in the cotton field, gets a 
settlement about Christmas time, giving him one-half of the 
crop and seed minus his living expenses and interest, and then 
he moves on. 

Of course he is a poor subject for credit. In the bottom 
lands he goes to the planter, who is his commissariat, his banker 
and his employer. If he is in the uplands, he goes to the sup- 
ply merchant who takes a mortgage on his ungrown crop. 
"Whether he works much or little he gets a living and usually 
he gets a living only. To him the planter makes advances 
usually in food and clothing, but sometimes in cash. What the 
planter charges for the supplies advanced depends on the 
planter's conscience. Some charge 25 per cent some 50 per 



ALEXANDER E. CANCE 443 

cent, some 100 per cent or more oyer cash prices and some add 
m the date at the head of t,he column when making up the 
yearly account. Whatever the planter charges, he has a good 
many bad accounts. These, of course, the honest cropper 

must pay. 

The halver of the uplands and the poor lands may be black 
or he may be white but 90 to 1 he is abject, shiftless, hopeless, 
frequently drunken. He has no credit capacity and very little 
productive ability. No one except his merchant would ad- 
vance him anything. The only security he can offer is his pros- 
pective crop or perchance the name of the landlord who 
"stands" for him. 

The renters are in a little higher class. The share renter 
probably has a mule and a wagon ; a few of them have harnesses 
and plows and perhaps a little household furniture. The cash 
tenant may add another mule and once in a long time a cow 
and perhaps a pig. In the bottom lands there is comparatively 
little difference between the dependence of the cropper and 
the renter. With the exception of the fact that the renter may 
use his own mule as he pleases, he is as much under the super- 
vision of the landlord as is the cropper. His chances of profit- 
ing by his crop are greater than the chances of the cropper. 
On the other hand he risks more. 

In the uplands the renter has a little more independence. 
In fact, the cash renter of the upland South is in much the same 
social and economic position as is the small landowner. Few 
of the renters are very intelligent. Comparatively few are ac- 
quiring land. Not many of them are progressive. 

Credit for Crop Making Universal 

Practically all renters seek credit. They can offer as se- 
curity a chattel mortgage on their tools, mules and other live- 
stock, if they have any. Of course they, too, may give a crop 
mortgage. The renters usually seek advances from the coun- 
try merchant who provides them with their livelihood during 
the crop-making period, furnishes their seed and mule feed, 
and takes a second lien on the crop. The first lien is a land^ 
lord's lien for rent. In order to supply the renter with cash 
or supplies, the merchant must go to the local bank or to his 
factor. In either case, he becomes a sort of middleman be- 
tween, the banker and the producer. As a middleman, he takes 
whatever toll he can, charging not only a comparatively high 



444 MARKETING AND FARM CREDITS 

interest rate running from 10 per cent to 20 per cent per an- 
num, but also a bonus or additional charge for making a loan. 
This sometimes increases the rate on small loans to 50 per cent 
per annum. A very frequent method is to charge 10 per cent 
tlat, whether the loan runs for 3 months, 8 months or 1 year. 
There is no doubt whatever that in a great many instances the 
merchant takes an unfair advantage of the renter and charges 
him outrageous rates of interest. A further complication of 
the situation is that the planter is frequently a ginner, mill 
owner and merchant. Consequently, he receives his profits not 
only from the plantation but from the store, the gin or the cot- 
ton mill. For this reason, of course, it is for his interest to 
charge as much as he can for supplies, and pay as little as he 
can for cotton in addition to obtaining as high a rental as com- 
petition will allow. 

The Land Owner and Credit 

The land owner is nearly always a borrower whether he be 
a large landlord of the alluvial region or a small operating 
farmer of the uplands. In some states probably 50 per cent to 
80 per cent of the loans secured by owners come from the 
banks. In recent j^ears a very much larger number of owners 
apply to local banks for the necessary cash. The owner needs 
money for current running expenses, for seed, for fertilizer and 
for household supplies. If he has a commissary he needs money 
to pay for the supplies he keeps on hand. A great many farm- 
ers buy mules and farm machinery on credit, and of course 
a small number at least borrow for permanent improvements, 
for building barns, levees, roads, drains, and the like. All evi- 
dence goes to show that the capable and progressive land-, 
owner is able to secure money on better terms than the renter. 
It is evident that the best farmers pay slightly more than the 
rate charged for the best commercial loans, but it may be said 
that few loans are made for less than 10 per cent. It is cus- 
tomary also for banks to take the interest from the principal, 
when the loan is made. The poor small landowner is in much 
the same situation as the renter. 

Such is the situation as regards tenancy and production in 
the South. Looking at it from the standpoint of the lender of 
money, it is my firm conviction that 10 per cent to 20 per cent 
of the farmers of the South are hopeless credit risks. Any- 
body can get credit in the South, provided he pays enough for 



ALEXANDER E. CANCE 445 

it. But this big minority of all the farmers does not deserve 
credit from the standpoint either of integrity or of productive 
capacity, from ivillingness to pay or ability to pay. For this 
reason, in many, many instances rates of interest are very 
high, and banks are unwilling to make loans for the length of 
time necessary to produce a crop. It is very hard, for example, 
to get money from August to January. National banks are 
permitted to discount farmers' notes for a term of 6 months; 
but 6 months is too short a time, for many are not o^^mers and 
renewals cost money and trouble. 

The Money Lenders Force the Continuance of Destructive 
One-Crop System 

Few banks and few merchants are willing to lend on security 
other than chattel or crop mortgages and a crop mortgage must 
be based on cotton. This unwillingness to loan on other than 
a cotton basis fastens upon the South perpetually the one-crop 
system. It prevents diversification of crops and introduction 
of livestock, the growing of products that will give a return to 
the farmer throughout the year. In many instances it has 
given the country merchant the ownership of vast tracts of 
land upon which the former small owners are now eeking out 
a miserable livelihood as tenants, hopelessly in debt, always at 
least 9 months behind. 

There are more evils in the situation than I have time to 
mention. These evils have a different complexion in different 
parts of the South; but most of them find their cause in the 
one-crop system, the crop mortgage, the supply merchant, the 
short-term tenancy, and the ignorance and shiftlessness of the 
tenant class. 

Picture the renters of the Eastern Cotton Belt, say northern 
Georgia or South Carolina, moving from one plantation to an- 
other in great numbers in January of each year. The proces- 
sion is usually led by a worn-out mule or decrepit horse haul- 
ing a broken-down wagon, driven by a worn and tired woman 
surrounded by several poorly clad, poorly fed children. The 
wagon is loaded with an old mattress, a few chromos, 2 or 3 
broken chairs, a rusty stove, and a few odds and ends of house- 
hold utensils. Behind the wagon follows a toil-worn man, 
ragged, unkempt, discouraged. He is probably leading an 
emaciated cow. This cow and the mule and the few household 
utensils represent his sole belongings. He is moving from one 



44G MARKETING AND FARM CREDITS 

defeat to another. He has probably been moving in this ^va^' 
for 20 years. He g:ets no farther ahead and he can scarcely 
lose ground. The saddest part of it all is that this is a white 
family, onr own kith and kin. Under different eireumstances, 
they wonld be as strong and healthy and wholesome citizens as 
any in our commonwealth. As it is, they are poor, ignorant, 
hopeless. That they have the making of tine men and women, 
I can testify from a dozen instances, bnt the system keeps them 
down in what might be the most productive region of the 
United States. 

Some Demonstarted Facts in the Situation 

1. The all-cotton farm is less profitable than the food, feed 
and cottc\n farm. 

2. The all-cotton farm is less safe as a banker's risk. 

3. Bankers will actually lend to owners and renters on bet-. 
ter terms if the risk is safer, i. e. on the food, feed and cotton 
enterprise. 

■1. Under this system the operator can pay eash for his sup- 
plies and save 10 per cent to 30 per cent on his usual supply 
bill, or bill for ''advances." 

5. That the operator will need much less cash for supplies is 
proved by Italians. Swedes, Genuans and other foiviguei's in 
many parts of the cotton kingdom Avho are raising cotton prof- 
itably. 

6. ^Merchants on the whole would rather sell for cash. 

7. The rent may still be paid in cotton, or a cash rent given 
based on cotton. 

S, The merchant is in the grip of the lender as well as rhe 
farmer. 

Signs of Hop€ 

Nevertheless there are some signs of hope. 

1. What the foreigners can do and are doing : buying land — 
obtaining credit — lessening supply accounts — shaping the pol- 
icies of the state — exhibitmg the virtues of honesty, frugality, 
industry and desire foor education. 

2. Some banks lending to tenants for cash, as a line of credit. 

3. In boll wevil-ridden districts like Southwestern Missis- 
sippi, hogs, cattle and diversification have come ui. The Nat- 
chez slaughter house buys this stock and has been building for 
years : it cannot i*each completion. 



ALEXANDER E. CANCB 447 

4. Some splendid examples of rural leaders — planters, lec- 
turers and demonstrators, fine women may be seen in the cot- 
ton land. 

5. The young people are giving demonstrations of community 
organization, productive capacity and cooperative enterprise. 

Some Remedial Measures 

The remedies we offer may be disappointing to those who 
look for some panacea. There is no panacea. There are no 
1, 2 or 3 pieces of legislation or projects of statesmanship that 
can bring peace and prosperity to the rural South. There must 
be an awakening along the whole line, the changes must be 
fundamental and the kingdom of righteousness must arise 
within the South. 

In the first place, education ; a more enlightened educational 
system, both rural and agricultural, is needed. A regime of 
compulsory education must be inaugurated. Only 44 per cent 
of Texas children are in school. The percentage of illiteracy 
among the whites of the rural South is hopelessly high. Among 
the negroes it is appalling. For years, 2, 3 or 4 months of vol- 
untary school attendance has been considered sufficient in the 
cotton states. Very little attention has been given to agri- 
cultural education. We need an educational awakening in the 
South, such an awakening as is taking place in North Carolina^ 
for example. 

Second, the South needs a more progressive agriculture. 
This means diversification of crops ; the introduction of a gar- 
den on every tenant farm ; the growing of quick money crops, 
crops that the farmer can turn into money before the cotton is 
harvested ; the introduction of livestock — hogs, cattle, mules ; 
better farm management, the organization of the farm in such 
a way that there will be a balance between the money crop of 
cotton and the food crops, hay, grain and the like. The chief 
agencies in promoting this progressive agricultural develop- 
ment are going to be the county agents and farm demonstrators 
throughout the South. These men are going to introduce a 
new spirit into agriculture by teaching the farmer on his farm, 
and the boys and girls in the schools, the right methods and a 
broad outlook ; they are going to free the South from the slav- 
ery of cotton and crop mortgages. 



448 MARKETING AND FARM CREDITS 

Community Action Needed 

Third, eommimity spirit and enterprise. The most signifi- 
cant rural movement in the United States today or in the world, 
for that matter, is the movement toward community enterprise, 
the organization of agriculture. The demonstration work so 
splendid and so significant in the South, the cattle tick eradi- 
cation by counties, the boys' and girls' clubs, the community 
organization, and the community spirit are the hope of agricul- 
ture in the future. Once the banker and the farmer can get to- 
gether so that the banker sees that the farmer's prosperity is 
vital to the bank, when the merchant prays for the tenant and 
ceases to prey on him, because his eyes are opened, when town 
and country can meet in harmony, then southern agriculture 
will come to its o^yTi.. Pix>gress must be by communities rather 
than by individuals. 

Foimh, cooperative organizations: (a) for livestock improve- 
ment, for alfalfa raising, for cotton, breeding, etc. ; (b) for 
creameries, ginneries and the like; (e) for warehousing and the 
sale of cotton and other crops: (d) for obt<iining credit. All 
these are part of the community organization just spoken of. 

A Community Credit Plan 

So far as credit goes there need be no set form for these credit 
or rating associations. Suppose a community needs more and 
better livestock. To mature livestock requires an outlay of cap- 
ital or an extension of credit for 2 years or more. Let those 
who would buy cattle pool their credit and pledge their several 
properties for security. Let each offer a mortgage on the stock 
purchased, provide for payments of interest and principal regu- 
larly and in reasonably frequent installments. Let the associa- 
tion stand sponsor for the entire loan and hold each member 
I'esponsible to the association and the circle is complete. If such 
a project were presented to the local bank by a dozen responsible 
men, asking money to invest in a productive enterprise, the bank 
could not afford to refuse credit on the ruling commercial terms. 

Some growers need machinery or mules or silos. Let the good 
men get together and draw up a tiiie inventory of the property 
ovrned. Let them decide on the maximum loan. The good men 
will guarantee the loan of each member. John Smith will get 
$200 ; James Jones $500 ; $1,000 for Henry Davis ; $50 for James 
Edmonds ; etc. When John Smith desires a loan, let him apply 



ALEXANDER E. CANCB 449 

to the association of good men who will consider the amount 
asked, the use he desires to make of the loan, collateral property 
he offers to secure and the conditions of payment ; if the associa- 
tion approves let them endorse the application and turn it over 
to the local bank, guaranteeing jts payment. In other words, let 
the association stand as the financial middleman between the 
banker and the farmer. Let the association guarantee the loan 
at the bank by a joint and several note and let them require the 
individual to give to them a chattel mortgage covering the loan 
he receives. I am sure that the bankers will meet the farmers 
more than half way in this attempt to secure productive loans 
and develop honesty and integrity among the borrowers. The 
banks will lend more freely and the farmers will be able to bor- 
row larger loans on better terms. 

This plan of cooperative credit does not necessitate the estab- 
lishment of rural credit banks. All it presupposes is a group of 
farmers who trust each other and are willing to pledge their joint 
credit for the good of each. If the farmers will not trust each 
other, they cannot expect the bank to trust them. If they will 
not accept each other's security they cannot expect banks to ac- 
cept their security except on harsh and unprofitable terms. 
Nevertheless any f ar-'reaching scheme of this kind will demand a 
central bank or some central financial institution to assist these 
local rating institutions both financially and with advice and di- 
rection. 

The Rating Sheet 

Fifth, the use of a rating sheet by bankers for the purpose of 
making agricultural loans. The Texas Bankers' Association is 
using a rate sheet, asking pertinent questions concerning the 
amount of livestock owned by the farmer, the rotation of crops, 
the number of acres in hay and vetch, the number of acres in 
cotton, the farmer's equity in land, the farmer's possessions in 
other property, etc. Emphasis is laid on good methods, the 
keeping of livestock, the purchase of food crops, and the produc- 
tive purpose of the loan. It is quite evident that the existing 
banking facilities of our Southern States should be employed, 
provided the farmer can make reasonable terms with them. 
There are almost twice as many banks per thousand of popula- 
tion in Texas as there are in Massachusetts. The use of this 
rating sheet means that the bank will take an interest in the de- 

29— M. F. c. 



450 MARKETING AND FARM CREDITS 

velopment of better agriculture and the supervision of the pro- 
ductive use of money. 

Sixth, loans on cotton which has been stored in approved stor- 
ages. These storages may well be built by cooperative warehouse 
associations or cooperative exchanges among farmers. The 
Texas Bankers' Association has worked out a good plan for mak- 
ing these loans. The loans are extended on the basis of $35 per 
bale with an annual interest charge of 6 per cent, the loans run- 
ning 6 months. These loans enable the grower to hold his cotton, 
but are not of much service for crop production since they come 
at the wrong time of the year. Six months is too long a term for 
some growers, too short for others. However, this plan put into 
execution represents at least 1 step in advance. 

Fundamental Principles 

Any credit plan that is not based on a utilization of the local 
banking facilities, that does not provide for organized financing 
on the part of the farmers, and that does not encourage or compel 
the productive use of capital and intelligent industry, honesty and 
integrity on the part of the borrower will utterly fail in meeting 
the southern needs. No governmental scheme of credit will 
assist farmers who do not help themselves, and any credit scheme 
whatsoever will fail that is not built upon the fundamental bases 
of credit — willingness to pay, that is, integrity; and ability to 
pay, that is, productive capacity. 

Moreover, the regeneration must come from within. The 
South must help herself. Rich in soil she must see to it that the 
productive forces are not wasted. If her crop mortgage and her 
merchant advancing system is uneconomic — it is a southern, not 
a national problem and the South must throw off the incubus 
and work out her own salvation. The fact that many farmers 
in the South are now doing it shows that the program is possible. 

Final Conclusions 

A. It is essential that there be rural leadership rising from 
among the southern people. Such leadership must be developed 
from some or all of the following : 

1. In Alabama and Texas, the bankers' associations are doing 
a remarkable work and are evidently striving earnestly to find a 
solution of the credit question. In other states individual 
bankers are working out the problem in their o^vn communities. 



ALEXANDER E. CANCE ^r-j 

I know of a number of local bankers in the South who have suc- 
ceeded adnurably in solving the problem of rural credit. 

2. Landlords with spirit, intelligence and foresight There 
are a lot of these in the South but we shall need more of them to 
take hold of this work with energy. 

_ 3. County agents, farm demonstrators, extension workers ag- 
ricultural educators of various sorts. These men are just begin- 
ning to get a vision of what is needed in the agricultural South 
Ihey are working ^dth a plan and with a purpose and a few 
years of their work will show marvelous results. 

4 Local men of enterprise, from any or every walk in life 
with the good of the South at heart, especiaUy those who see the 
need ot rural education and an intelligent farming class. 

5. The great cooperative organizations, as the Farmers' Union 
cotton growers' associations, crop improvement societies, Ameri- 
can Society of Equity and others. These organizations must 
take the leadership with others for better conditions. 

B. There must be a recognition of the fact that the credit and 
given to farmers is not altruistic or philanthropic but that it is a 

1. No section of our country is physically fitted to give better 
returns to investment in agriculture than our rural South We 
must understand that the surplus capital obtained from agri- 
culkiral production is the capital which must go back again to 
produce stiU more. The South does not want a gift: it needs 
money for investment. 

2. Legislation to eliminate the crop mortgage and the crop 
hen on ungrown crops. This is outworn, useless and hangs like 
a drag upon the necks of the southern farmers. With this 
should go the compulsoiy commissary systems. They have not 
been needed m other parts of the country where agriculture has 
developed under much harsher conditions. They are not needed 
m the South._ It is time that the southern legislator eliminates 
these institutions. 

3. In many places the cash wage and the share rent system can 
be substituted for the cropper regime. This will do a great 
deal to loosen the joints of credit. 

4. The development of reasonable schemes of land ownership 
m connection with a wholesome tenant system. There is no ques- 
tion that the truant system may be made a wholesome one. There 
IS a^o no question that the small land owner is the backbone as 
well as the flesh and blood of our agricultural population in the 
Unitea States. 



452 MARKETING AND FARM CREDITS 



THE LANDLORD AND TENANT IN PRODUC- 
TION IN THE SOUTH, AND THE MARKET- 
ING OF COTTON 

W. B. Yeary 
President, Texas Cotton Growers' Association 

I have been requested to discuss the following subject, "The 
Landlord and Tenant in Production in the South," and to show 
relation of tenant and landlord to various interests that must 
now be dealt with in producing southern crops. 

The subject embraces 2 distinct subjects. The relation or 
work as affecting tenant and landlord is one. The subject 
would only refer to their dealings, plan of renting, working 
and marketing. The other would embrace those other interests 
which aid one or both of them in producing, harvesting and 
selling the product and the interests which, interfering with a 
change in marketing methods, makes the handling a wasteful 
system and prevents prosperity. 

There are at least half a dozen tolls taken from cotton that 
are unnecessary. Each toll t.aker objects to any change being 
made, knowing it would destroy, or seriously interfere with his 
profits. These features are the ones which need changing and 
are the ones I shall embrace in my paper, although the subject 
mentions ''production." I do this because I presume you are 
tr>ang to find the source of the trouble the southern producer 
is having, and desire to find him a remedy for them. 

There are 2 systems of renting. But before going further, 
will say I will only discuss that part of the subject which has 
to do with cotton, because cotton is our main crop, and must 
be until our seasons and climate makes radical changes, and 
because all other crops depend upon cotton money for their 
sale or use. One of the systems of renting is that in which the 
tenant furnishes everything but the land and gives the land- 
lord one-fourth of the cotton and seed or one-fourth of what 
they bring. The tenant under this system usually does the 
selling and most generally divides his crop between cotton and 
com to suit himself. The other plan is for the tenant to fur- 
nish nothing but the labor and each receives one-half. In this 
case the landlord sees after the selling or does the selling him- 



W. B. YEARY 453 

self, sometimes with the knowledge of the tenant and most 
frequently without his knowledge. This class of tenants is 
as a rule, less intelligent than the former; for this reason a 
certain class of landlords prefer to rent to them. They will 
buy more from the commissary, can be fooled more easily and 
can be managed or forced to do the landlord's bidding. 

Allow me to digress a little at this point to explain that but 
few speakers before the public seem to realize why the South 
has such a large per cent of tenantry as compared with other 
sections. It is because there is no money in hiring hands to 
make cotton. This being the case a man wdth more land than 
he can cultivate with his own family rents it out. Occasionally 
one will find a section of the country where ignorant labor can 
be employed. I mean ignorant in the way of education or any 
thing else except how to make cotton, labor that can be driven. 
Such frequently the best cotton producer, but it can be beaten 
out of its toil. But few men would rent their land out to others 
to manage if they could hire hands and come out ahead. Yet if 
this condition existed the tenant would soon be a home-owner. 

The Tenant Starts in Debt 

The tenant, and most of the medium-to-small landowners 
are in debt to start with and must make some arrangements for 
for food and clothing while making the crop. If the tenant, or 
landowner, is known to be honest, industrious and economical, 
he can, in some sections, buy supplies from the merchants or 
borrow a small amount of money from the bank without giv- 
ing security. Otherwise, if he buys an implement he gives a 
note for it with a mortgage on it and a mule, cow, hogs or cot- 
ton; or he gets his landlord to sign the note as security for 
him. In either case the debt is due when cotton is picked or 
as it is picked. The mortgage may be to one merchant for the 
first bale, to another for the second and third bales and so on. 
As the first bale is picked, the debt against it is expected to be 
paid, and so on. 

If the landlord "stands" for the supplies, he holds first lien, 
over any one else. 

The banking rate of interest is high in the South, also the 
profits on supplies are enormous; but neither are too high for 
the risk taken. The banks are not making vast fortunes; in 
fact their profits are in notes carried over from one year to 
another and they hardly know whether they have made a clear 



454 MARKETING AXD FARM CREDITS 

profit or not. The merchants are in the same shape. Statistics 
bear this out by the mercantile failures in the South. 

Still statistics do not approximate the real condition. There 
is hardly a retail merchant who sells goods on time who has 
been in shape that he could close up and pay out in the past 10 
years in the cotton districts. The wholesale houses know this 
and can not afford to close them out. Of course, this condi- 
tion compels the wholesale houses and manufacturers to add 
sufficient extra profit to cover these risks. No one is to blame 
for these extortionate rates. The retail and wholesale mer- 
chants and country banks would be glad to have their busi- 
ness made more safe and charge a less profit but they can not 
under present conditions. 

The Banks Borrow Money to Lend Money 

The banks, like the merchants, borrow money during the 
spring and summer from their Eastern connections to loan to 
their customers to make crops. All of the interest a bank 
charges is not profit as it would be if the bank's customers 
were depositors. It must be remembered that most of the bor- 
rowers never have a deposit in the bank. They borrow enough 
money to pay for a mule, an implement or some feed and never 
see another dollar until the crop is gathered, then they take 
the cotton tickets to the bank or merchant holding the mort- 
gage and pay their debt or as far as it will go. 

Very few get out of debt, and they have next to nothing to 
buy winter clothes with or other necessities. Frequently one 
^vill get his crop gathered before some neighbor who has a 
large crop or has had some sickness and will take his children 
and gather for his neighbor to get money to buy clothes and 
school books. 

There is no fault, in general, that can be laid upon any one 
or any class. The tenant, although poor or ignorant on any 
and all other lines, is most usually an expert at preparing, cul- 
tivating and gathering a cotton crop. I know of 2 men who 
have been employed by the national government for many years 
as experts in seed breeding and such work who have become 
landowners or in the actual work of managing farms, who say 
the average tenant is an expert in the production of cotton. 
They did not think so a few years ago. 

The above conditions relating to farmers and other interests 
will not be such a mvsterv when it is undei-stood that the 



W. B. YEARY 455 

average cost of producing cotton, basing wages at $1 per day, 
is 50 per cent higher than the average selling price. In other 
words, the producer of cotton works for about 50 cents per 
day. This price is not the highest price the consumer of cot- 
ton is willing to pay for it ; but is the lowest he can get it at. 
We throw 12 months supply of cotton on the market in from 
3 to 4 months and ask the consumers what they will give for 
it, or say to them, "Here it is; give us all you can for it." 

Does any one expect it to bring half its value ? Would any 
thing else that is for sale bring half its value ? If a trainload 
of shoes, clothing, implements, automobiles or anything else 
were thrown on the market in this way to pay for their mak- 
ing would any one expect them to bring half their value? 
There is no use for you to study any other feature of agricul- 
ture or rural conditions imtil this evil is stopped. It is the 
breeder of all others ; its cure will cure all others. 

There are several interests that oppose the South in pric- 
ing her cotton. How they do it can be best explained by fol- 
lowing the line of production to its end. After the bale of 
cotton is ginned and ready for the market it generally goes to 
the streets. Here it is cut open on one or both sides, and about 
a poimd of cotton is taken out to find the grade. Frequently 
from 2 to 6 buyers look at it, and each one makes a new cut. 
This gets the covering or bagging about destroyed. Finally 
one buyer bids 5 or 10 cents per bale higher than the others 
and takes the cotton. These buyers get their limits to pay for 
cotton from the exporting firm in some city whom they are 
working for. These limits are furnished every few minutes 
by wire or phone. Sometimes half a dozen buyers in a town 
will agree on how close to their limits they will pay, thus 
getting the cotton for less than the market price. 

Part of this loose cotton, taken as samples is taken by the 
one who buys the cotton, the rest is stuffed about the bagging 
which finds its way into what is known as "the city crop'' 
later on. It is partly taken out by the local cotton yard and the 
balance and a good lot more is taken out when the bale gets to the 
compress, where the ties are cut and the bale is compressed to 
about double its gin density. Here patches of the previous 
year's bagging are put on and in the holes cut in the covering 
to make up the loss made by taking the cotton out and enough 
extra to amount to 8 or 10 pounds more. On account of the 
worthless covering and the dirt and trash that sticks to the bale 
the spinner deducts this amount more than the actual tare. 



456 MARKETING AND FARM CREDITS 

This extra amount is put on to equal the amount the spinner 
is known to deduct. 

Remedies Should Begin at the Gin 

From these transactions it can be seen that our cotton should 
be treated like cotton is in other countries. It should be pressed 
to its necessary density at the gin, a sample taken out of it 
before pressed and the bale completely covered with a lighter 
but safer covering and sold with a certain uniform tare. 
Presses are built for this purposes and cotton so pressed and 
wrapped is worth a premiiun OA^er the present way; but if a 
gin installs such a press the opposition gets busy. The buyer 
docks the bale 50 cents or $1 and thus kills the gin. He is of 
course upheld by the compress man, and, consequently, no 
progress can be made along this line. If the farmers could 
sell to the spinner direct, that is all that patronized such a gin, 
they could force the change : but from the explanations of how 
the farmer is tied up, you will readily see how impossible it is 
unless an association were formed in some way to handle the 
crop in place of the way it is. You can see where the govern- 
ment could do a great deal towards standing off this opposition. 

Fear Prevents Organization 

A great many people are afraid to attempt an organization of 
the producers of cotton on account of the opposition. "While 
fruit growers and other producers whose products are not dealt 
in on the exchanges have organized and are successful, they 
are confident, from past experiences, that the speculative and 
other interests would find some court that would assist in the 
destruction of the organization. They point to the action of 
Congress in the Clayton bill, in which an effort was made to 
give agriculture permission to organize without violating the 
Sherman Anti Trust Law. The best that could be had was per- 
mitting labor and agriculture to organize provided they did so 
icifhout a capital or not for profit. Such legislation does not 
look good to farmers. It does not look as if Congress had 
enough interest in agriculture to oppose the interests that are 
preventing their prosperity. 

Cotton, like all agricultural products which are dealt in on the 
exchanges, is easily affected in price by organization of the pro- 
ducers. Any movement which aids the producer to organize or 
hold in an organized way, helps the price. This is seen every few 



W. B. YEARY 457 

years. During 1909 and 1910, some southern speculators made 
an effort to get in control of sufficient cotton to be able to dictate 
the price. The price the year before they began and the year 
after they quit was about 9 cents. The 2 years they operated 
averaged 14i^ cents, although they never owned more than 
300,000 bales at any one time. As you know they were indicted 
for advancing the price of cotton in restraint of trade, thus vio- 
lating the Sherman Law. 

A cotton growers' association was started during 1912 and op- 
erated through 1913 with similar results as to price and method 
of destruction. Many think, or profess to know that the specu- 
lating and cotton interests were the cause of their indictments. 

This fall we have an example of the effect of aiding the pro- 
ducers in marketing. When the crop opened up the price ran 
around 8 cents for some time, then Secretary McAdoo placed 
$30,000,000 in the reserve banks to be loaned to the farmers to 
hold their cotton, and announced that he would furnish more if 
necessary. Consumers of cotton, also speculators of the board, be- 
lieved the farmers would borrow it and hold for a fancy price. 
Consequently, many spot cotton consumers and future cotton 
dealers became "bulls" and began buying heavily which ad- 
vanced the price rapidly to 12 cents and better. At this point 
the country merchants and banks advised their customers to sell 
in place of borrowing and holding, which they did. When this 
was discovered the future dealers sold out and took their profits 
and the spot men quit buying, with the result that the price 
dropped rapidly. 

I mention these incidents to show how easily the price can be 
made profitable and practicably stable. You mil understand 
when any thing of this kind is attempted it will be opposed by 
all interests that now have any dealings with, cotton unless it be 
the spinner. I am informed that he would rather have a stable 
market for his raw material. 

Other Enemies of Cotton Producers 

AUow me to state that the retail and wholesale merchants, also 
the country banks, are enemies of cotton in so far as holding it 
off the market; because they owe debts that are pushing them 
and unless the pressure is taken off from them they must oppose 
holding. Buyers and speculators are enemies to cotton because 
to make any beneficial change will injure their business. Many 
banks, especially city banks, are interested in some way with 



458 MARKETING AND FARM CREDITS 

the exporters of cotton and oppose any change, because it would 
interfere with the exporters' business, consequently their own. 
Many country banks are similarly tied up. As to rural credits; 
the farming class only desires a business system of selling their 
products so they can i\ay out a debt, not one that will enable 
them to borrow money and get deeper in. 



THE TENANT OF THE NORTH AND THE 
MARKETING OF HIS CROP 

B. H. HiBBARD 
Professor of Agricultural Economics, Vniversity of Wisconsin 

Since the first count of tenants wa^ made, in ISSO. the number, 
•and the proportion, in the Northern States has been on the in- 
crease. In 18S0 there were 2 farms out of every 10 in the 
North Central States in the hands of tenants ; in 1910 three out 
of every 10. In the "West the proportion of tenants has not in- 
creased so rapidly. In the East it increased from ISSO to 1900 
and during the next decade sliowed a decline in favor of owner- 
ship. 

Perhaps the increase in tenancy in the North Central States 
from 20 per cent to 30 per cent may not look so very, very alarm- 
ing since the latter figure is low enough to suggest a thorough- 
going predominance of land-owning farmers. But on closer 
study the case does not look so flattering. The North Central 
Strifes is a big section of country, in fact over a tifth of the area 
and almost a third of the population of the United States is here 
included. Here is found a third of all the farms and half of 
the land values. Almost half of the horses, cattle, and machin- 
ery are found here while two-thirds of the grain and hay crops 
of the country are produced ui these 12 states. 

Were the 30 per cent of tenant farmers spread evenly over 
the entire area of these states their presence would not attract 
a very great deal of attention, but such is not the case. They 
are congregated very thickly in certain parts of the territory, 
and are therefore quite spai-sely distributed in other sections. 

For example there is a wide range between the -il per cent of 
tenants in Illinois and the 14 per cent in Wisconsin, even though 



B. H. HIBBARD 459 

the states do join. Likewise there is a great contrast between 
the 38 per cent in Nebraska and the 14 per cent in North Dakota. 
To what can such wide variations be due ? 

First let us notice the tendency of the renter to gravitate 
toward the land high in value. For example, the average value 
of land in Illinois is over 3 times as great as that of North 
Dakota and the proportion of tenancy corresponds very closely 
with the respective valuations, there being about one-third as 
large a share of farms rented in North Dakota as in Illinois. 

But the same situation can be found without going so far. 
Here in Illinois can be found as striking contrasts as anywhere 
in the country. For example, in the very choicest part of the 
state is a block of 14 counties in which at the last census the land 
was reported at upwards of $150 per acre. In this area were to- 
be found as many tenants as land-owning farmers in 1900, while 
during the next 10 years the tenants increased 10 per cent and 
the land-owning farmers decreased in like proportion. Tu one 
of these counties there are more than 2 tenants to 1 farmer own- 
ing his land. In contrast to this a block of 19 counties may b,e 
found in another part of the state where the land is valued at 
but one-third as much per acre. Here the tenants are about 
one-half as numerous in proportion to the number of farms, and 
the rate of increase less than half as great as in the other group. 

Large Holdings Increase Tenancy 
Again the sections of the older states in which the size of farms 
seems to be on the increase show also an Increase in the number 
of tenant farms. For example, in the group of counties in Illi- 
nois in which the value of land is so high the farms are not only 
large but tend to become larger. In the region of lower prices 
the size is not so great and the increase is not pronounced. The 
explanation of the greater prevalence of tenancy on large farms 
is the same as on land high in value per acre — the difficulty in 
obtaining the money for the initial payment enabling the buyer 
to borrow the balance. It takes $10,000 to make a 50 per cent 
payment on a farm in Central Illinois, while one-fifth that 
amount will make a similar payment on the average farm in cer- 
tain other counties. That the investment is as good a one on the 
high priced farms as on those low in price does not alter the case 
so far as the young man without money is concerned. 

It may be that the ownership of a railroad is more desirable 
from the standpoint of profitable investment than the ownership 



460 MARKETING AND FARM CREDITS 

of farms of any size or value, but even so relatively few men will 
buy railroads. A man may within a period wbich. does not look 
altogether discouragingly long amass $2,000 needed for the pur- 
chase of the farm smaller in size and lower in value while he may 
be altogether unable to see in his imagination the time when he 
can caU himself the owner of a farm worth $20,000, Hence the 
majority of the logical ownei's of such land either turn their at- 
tention to some other kinds of work, or they settle down to a term 
of tenancy in hopes of buying land in some part of the country 
where it costs less than in their neighborhoods. 

It may be of interest to look a little more closely at the tenancy 
situation in the outlying portions of this big section of country. 
In Northern "Wisconsin and Minnesota a considerable part of the 
Dakotas, and the western parts of Nebraska and Kansas the pro- 
portion of tenants is decidedly low as compared to the rest of the 
district. The most important reason for this is undoubtedly the 
fact that throughout this long stretch of country land is cheap. 
Anyone owning a farm in the ^dcinity of great areas of unused 
land, held ready for sale at 10, 20 or 30 dollars per acre is well 
aware that his unearned increment is not greatly augmented 
by the annual rental income from his farm. Land is not 
rentable in the neighborhood where selling values are so low as to 
enable the man with a few hundred dollars to become a farm 
owner. The instinct to own land is strong and few Americans 
have thus far become farm tenants from free choice. In the Da- 
kotas and further west the presence of government land has pre- 
vented the growth of tenancy. It is popularly supposed that the 
period of taking land under the Homestead Act was mainly past 
some 25 years ago. As a matter of fact there was never another 
5-year period during which as much land was taken up by home- 
steaders as from 1909 to 1914. All of these homesteads count as 
farms and wherever they are numerous, help to hold the number 
of rented farms down. 

Type of Farming Influences Tenancy 

Tenancy is influenced greatly by the type of farming. The 
tenant flourishes in connection with crops that can be put in, 
harvested, and sold within the year. This is necessarily true in 
a countiy where leases are in the majority of cases for one year 
only. He keeps fewer cows, raises fewer horses, and has a 
smaller acreage of perennial crops, such as fruit or hay than has 
the farmer who owns the land. Tenants raise vegetables of the 



B. H. HIBBARD 461 

annual kind, even such a thing as asparagus, needing care for a 
few years before yielding returns is not produced by tenants to 
any great extent. In a similar manner the tenant raises the live- 
stock which corresponds to his period of tenure. He is short on 
cows but has his full quota of hogs. He can raise and market 
the hogs within a year. So far as cows are concerned he is pre- 
vented from doing much on account of the general lack of barn 
room, pasture, fences, and the like. 

Even though he should have a fair equipment in one place he 
is doubtful about what he will find on the next one he occupies. 
There are a few interesting exceptions to the general rule that 
tenant farmers do not go into the dairy business; where the 
prevailing type of farming is dairying, a system of tenancy 
has developed suited in a very good manner to it. It is 
called the stock-share plan, by which farm owner and the ten- 
ant are virtually partners, each owning a half interest in the 
dairy herd. This gives a stability and permanence to the ten- 
ant system which can hardly exist where the farm owner has no 
interest in the equipment of the farm. Of course this plan is by 
no means confined to one state or one group of states. It is be- 
coming the most usual type of farming in the distinctive dairy 
district of Wisconsin, and is making much headway in Iowa and 
Minnesota. Nevertheless, in all the western country, and over 
the greater part of the East, tenant farms are not so well 
equipped with buildings for livestock as are other farms. Again 
tenants do not go into livestock raising because they are young 
men with little capital, and cannot raise the necessary money for 
such an investment. 

The greatest of the evils of tenancy centers around the short- 
ness of the time for which the tenant remains on a given farm. 
According to the last census report the tenants of the country 
remain on a farm between 2 and 3 years. This is not long 
enough to permit the tenant to become rooted to the soil, or at 
home in the community. 

Long Leases Versus Long Tenure 

As a remedy many are advocating the long lease and pointing 
to England as the classic land for that arrangement. To begin 
with, there are not many long leases in practice in England. 
There are, it is true, many instances of long tenure — quite a dif- 
ferent thing. But England has a tenant class; a class who ex- 
pect to remain tenants always; we do not Jiave such a class. 



462 MARKETING AND FARM CREDITS 

Hence our tenants do not always want a long lease, since they are 
so often just ready to buy for themselves. But of far more con- 
sequence is the fact that the farm owner does not want to lease 
for long period since his farm is nearly always for sale and the 
sale would be interfered with greatly by a 5-or 10-year lease. 
Our landlords are as a rule speculators to a greater or less de- 
gree, and so long as this continues to be the case the long lease 
will not appeal to them. 

Tenants are too transient to build up the best of credit rela- 
tions. They do not have enough property to furnish the best 
of security from the banker's standpoint. Hence they are 
largely dependent on friends or on the owner of the farm they 
occupy for the needed credit. No safe generalization can be 
made concerning the status of tenants in regard to credit beyond 
the undoubted fact that a great many farm owners have abund- 
ance of credit due .to the mere matter of farm ownership, while 
tenants have to show that they are **good". Often a signer is 
required, while as a rule the amount of credit over which they 
have command is strictly limited; they are subjected to special 
scrutiny. 

The mere fact that tenants are so often on the move makes 
them weak bargainers. In a survey of a district in Minnesota 
it was found that but a quarter to a half as large a proportion 
of tenants as landowning farmers belonged to cooperative or- 
ganizations. In such a case they were getting their marketing 
facilities at second Jiand and exerting little influence over them 
themselves. 

Tenants Are Non-Cooperators 

Among the cooperative elevators of Iowa, located in districts 
where the farmers are half tenants, and where tenants sell decid- 
edly more than half of the grain shipped, but one-fourth of the 
members of the companies are tenants. Thus three-fourths of 
the elevator shares are in the hands of men who own land, while 
the tenants selling more grain than all of these hold but one- 
fourth of the shares. Not only are the tenants in the hands of 
their landowing neighbors so far as the management of their 
land is concerned, but where the farming population is half ten- 
ants, with less than a quarter of them in a marketing organiza- 
tion it means strength to the line-elevators and all other private 
undertakings of the kind and weakness to the tenants and hence 
to the whole farming group. If ever the tenant class become 



CARL WILLIAMS 46^ 

more stable with respect to length of residence, or better yet, 
should a greater proportion of landowning farmers develop ont 
of the tenants of today, this weakness due to the transient stay 
of the tenant in a neighborhood may pass. So long as condi- 
tions remain as they are the tenant is a weak link in the chain. 
It is not so much that a company of landowning farmers impose 
on the tenants as that the tenants contribute so little strength to 
the marketing movement. In the first place they ' ' dump ' ' their 
produce because of lack of credit ; in the second place they dilute 
the strength of the farming community. Where the tenants are 
more numerous than the landowning farmers this is almost a fa- 
tal weakness since one of the fundamental principles of success- 
ful marketing organizations is stability of membership. There 
cannot be stability of membership where the majority of the log- 
ical members are on the move 4 times a decade. 



THE TENANT OF THE SOUTH AND THE 
MARKETING OF HIS CROP 

Carl Williams 
Managing Editor, The Oklahoma Farmer and Stockman 

The subject is the Tenant Farmer of the South, and the con- 
ditions surrounding Ihini in marketing his crop, and I can de- 
scribe that in 30 words. I am irrepressibly reminded of the 
one-legged man who w^ent out one evening and got drunk and 
he, on his way home that night, got his wooden leg into a hole 
and walked his other around himself all night; all the time 
Avondering why he did not get home. 

Now, that, my friends, is exactly the condition of the south- 
ern cotton farmer. He is going around and around himself and 
w^ondering why he does not get anywhere, and the reason for 
it, I shall attempt to bring forward right now, 

I want you to get the importance to the South, of cotton. 
It is the one crop in the world for which nature has no sub- 
stitute. 

Within the last 100 years it has risen to a financial rank 
which surpassesi that of any other commodity in its production, 
distribution, manufacture and final delivery in the form of 
finished products to the consumer. 



464 MARKETING AND FARM CREDITS 

The food of the world is necessary; but cotton is ahead of 
food in its demand for liquid capital. Iron and steel affect the 
imagination to a superlative degree because of the visible mag- 
nitude of the industries which are required to provide them. 
But iron and steel i:ank far below cotton in their demands on 
the world's credits, in the number of people engaged in pro- 
viding them and in their universal importance in the world's 
trade and its use therein. 

Here is a world wide business in a product whose raw value 
annually is not far from $1,750,000,000, and whose manufac- 
tured value is 2i^ times that sum. In the United States alone 
the average annual value of the raw cotton grown and sold is 
more than $600,000,000. 

It is the financial mainstay of the Southeastern quarter of 
our country; yet, so far as the cotton farmer himself is con- 
cerned, he is far worse off than if he did not grow it ; not be- 
cause it is cotton, but because of the financial system which 
has grown up around that crop and which directs the average 
annual profit obtained from its production into the hands of 
others than the men who are at the foundation of this great 
worlds business. 

If all farm crops were grown and marketed on the system 
by which cotton is raised, and sold, the agricultural districts of 
America would be well on the way toward bankruptcy within 
2 years. 

Cotton a Good Collateral 

Cotton is king, they say. Cotton is gold, they say. And 
their sayings are true. Under the system developed by those 
who control the cotton markets machinery of the world, this 
crop is unimpeachable collateral anywhere. A bale of cotton 
can be sold for a price in any city in the world. Money can 
be borrowed on it at practically its face value and at the low- 
est rate which prevails in the money markets of the country. 
Banks compete with each other for cotton paper. Cotton con- 
tracts are as liquid as stocks and bonds, and their speculative 
value is so certain that in years gone by, contracts for 30 bales 
have been sold and bought for every bale that was actually 
sold and delivered. 

But all this comes after the cotton has passed entirely out 
of the hands of the farmer who grew it. Before that time its 
value is based largely on the need of that farmer, and on the 



CARL WILLIAMS 465 

greed of the man with whom he is forced to deal. Cotton is 
again the one crop of the world which is bought and paid for 
before it is raised. The cotton farmer is practically always in 
debt : not because of his own inaptitude, but because of a finan- 
cial system, which actually takes away his profit before he 
earns it. 

I think I can make this clear: The average cotton farmer is 
a tenant farmer — often a shiftless tenant farmer; because a 
man who is lacking in hope and ambition is the only man who 
would willingly submit to the conditions which are imposed on 
him by the small financial powers of his neighborhood. 

Forcing Tenant to Grow Cotton 

He comes into a community with a few mules, a wagon or 2, 
some household goods and some farm machinery, and rents a 
little land. He is told by the landlord that he must grow 
cotton because and once again I use the expression — cotton is 
the one crop of the world which can be neither stolen, wasted, 
eaten, sold nor given away without the landlord knowing all 
about it. Through a cotton crop the landlord is certain of his 
rent. 

This tenant has little or no money. If he had he wouldn't 
be where he is. He goes to the country storekeeper for sup- 
plies and a credit is arranged, based on the number of acres 
this tenant will put into cotton. The country storekeeper also 
knows that cotton is collection insurance. This credit is a 
necessary thing for the tenant farmer ; but the goods which he 
gets are charged him on a time-price basis that is anywhere 
from 10 to 140 per cent more than the cash price in the same 
store for the same article. Since the average store credit is 
given only until cotton-marketing time and runs on the aver- 
age for only about 4 months, it does not take an expert ac- 
countant to figure out the interest rate per annum which the 
tenant cotton farmer is thus forced to assume in order to make 
his first crop. 

Mr. Clarence Poe, who recently collected time-price statistics 
from a number of Southern States, estimates that the average 
interest charge per annum, in the form of time-prices in the 
tenant farming districts of Texas, is 81 per cent; South Caro- 
lina, 73; Alabama, 78; Mississippi, 68; Tennessee, 65; Georgia, 
68; North Carolina, 62; Virginia, 54; Arkansas, 90; Louisiana, 
61. Is it any wonder that the cotton farmer is often in the 

30— M. F. c. 



466 MARKETING AND FARM CREDITS 

hole at the end of his season's operations? How mudh chance 
has any man to borrow money at such rates and earn a profit 
through its use ? 

How Banks Rob the Tenant 

However, if this tenant farmer of our is a good tenant farmer 
he may not have to buy supplies at any such remarkable prices 
as these. He may be able to pay cash. If his mules are young 
and his wagons new and his farm equipment fairly complete he 
can borrow from the bank. The bank is always glad to make 
good loans — at a price. The bank will lend him $200 on 30 
acres of cotton — estimated production, 10 bales; estimated 
value $600 — will take a mortgage on the cotton crop and on all 
the mules and wagons and farm equipment, and will charge a 
merely nominal sum for the accommodation — anywhere from 
12 to 40 per cent for a 4 months ' loan. The interest, of course, 
is discounted in advance, so that the borrower may actually 
get for his 4 months' use as much as $188. The note which is 
signed bears no interest rate whatever, which is sometimes a 
convenient thing in those states whose laws insist that the max- 
imum contract shall be 10 per cent. 

That these figures are not exaggerated is well enough shown 
by the recent statement of John Skelton "Williams, comptroller 
of the treasury, who pointed out that, in one southern state 
which I could name and in which there are 350 national banks, 
300 of those banks received an average interest rate of 10 per 
cent or more on all their loans. More than that : ' ' There were 
131 banks which reported that they charged a maximum rate 
of interest ranging from 15 to 24 per cent; 67 banks whose 
maximum rate ranged between 24 to 60 per cent; 22 banks 
which charged between 60 and 100 per cent; 18 banks whose 
maximum was between 100 and 200 per cent and 8 banks which 
owned up to having charged maximum rates between 200 and 
2,000 per cent. Most of these disgraceful and unprecedented 
rates were for comparatively small loans and to people who 
could least afford to pay them. 

If these are the sworn records of national banks for the year 
1915, what do you think of the state and private banks that are 
even less carefully supervised? Can the tenant cotton farmer 
earn a profit for himself under these conditions? 



CARL WILLIAMS 467 

Where the System Pinches Hard 

But this is not all. His credit account at the store is due to be 
paid November 1st — in some cases October 1st, in the far South. 
His note at the bank is made due and payable at the same time. 
The moment the cotton is picked these loans are called, and this 
action again causes the cotton farmer a loss which in itself is 
enough to cut all the profit from his year's operation. 

There is more injudicious and hurried marketing of cotton than 
of all the other crops combined. Within 3 or 4 months the entire 
production passes from first hands. The spinners' demands dur- 
ing September, October and November are soon satisfied, but the 
farmer does not withhold his offerings. The landlord, the banker 
and the storekeeper are clamoring for their due. 

Like any other product, cotton, if it is to sell at its natural value, 
must be sold as the demand calls for that sale. The farmer's 
credit matures in October, The merchant, who is carried by his 
bank and by the jobber from whom he buys, finds his own bills 
maturing at the same period. When the cotton is picked and 
baled there is heard over all the Southland the call of the creditor 
for cash. And so the farmer's cotton is hurried to market, not 
because of any special disposition on the part of the storekeeper 
or banker to oppress, but because of the economic system which 
has grown up in the cotton country and which does not recog- 
nize cotton as collateral for loans until it is out of the farmers'' 
hands and into those of the speculator who fattens at the ex- 
pense of the tiller of the soil. 

The time when the cotton farmer must pay his bills is the an- 
nual "low" in the cotton market. A look at the market rec- 
ords for any year since 1900 — ^I do not happen to have them any 
farther back than that — ^will show that there has been a range 
of from 2 to 7 cents a pound in the prices offered during the 
year. It will show, further, that the low point of the year, 
on the average, has come within the first week in November 
and that it has been caused by the huge amount of distress 
cotton which had to be thrown on the market by southern 
farmers in order to pay their pressing bank and store debts. 
Then, every year of the past 14 without exception, this annual 
slump has been followed by a nice rise in price as soon as the 
market had absorbed the heavy and sudden supply. And the 
speculator, who could always horrow money at from 3 to 8 
per cent with which to buy and hold this cotton while the 



468 MARKETING AND FARM CREDITS 

farmer could not borrow at all, is tlie man who reaps this por- 
tion of the profit from the farmer's operations. 

Mind, you, the same banker who charged the cotton farmer 
at the rate of 60 per cent a year on his summer loan, and 
who took a mortguge on everything that the farmer had in or- 
der to secure it, and who calls in that loan as soon as the cotton 
is picked and ginned, thus forcing the farmer to sell it, will 
promptly loan the speculator buyer of that same cotton its full 
face value at 8 per cent and will finance that buyer's operations 
for 2 or 3 months on this reasonable rate of interest. And 
this, too, in spite of the fact that the banker knows every 
atom of the cotton farmer 's business, and knows little or noth- 
ing of the cotton buyer nor of bis financial responsibility. 

When Cotton Becomes True Collateral 

'' Cotton is King, " they say. And their saying is true. The 
trouble lies not with the cotton, but with the handling of it. 

Cotton is subject to damage by fire, by water, by weather; 
it can be sold anywhere for cash. As a result, when this cotton 
is picked and ginned the mortgagor must get his hands on it at 
once in order to protect his investment. The moment he gets 
it, or the moment it is sold by the farmer, it goes into a bonded 
warehouse at gin or compress or concentration point, where it is 
guarded and insured and otherwise protected until its safety is 
made certain. 

Then, and not until then, does it become collateral with char- 
aeter on the markets of the world. The banker knows that the 
cotton is good, but he does not know that the farmer is good, 
and hence the present evil in the matter of early marketing. 

As if all this were not enough, still another toll is taken from 
the meagi-e income of the cotton farmer by his own lack of 
knowledge of the quality of his cotton. The various cotton 
buyers in the small towns in the South make a brave pretense 
of buying on grade and of paying more for cotton of good qual- 
ity than for cotton not so good. Any cotton merchant will ac- 
knowledge, however, that most of his country town purchases 
are made on a basis of quantity ; not quality. 

In the words of Charles J. Brand, "A bale in town is a bale 
to be sold; and the buyer knows it.'' Their chief concern is 
apparently not to pay the market value of the cotton, but to 
pay as little as they can get the farmer to let loose of it for. 
As a result of this one fact, instances are on record in my own 



CARL WILLIAMS 469 

state where 2 bales of the same grade in the same town on 
the same day, brought prices which varied as much as $19.25 
a bale. This particular price variation occurred at Magnum, 
Oklahoma, on November 7, 1912, and, though it is exceptional, 
it well illustrates the possibilities which lie in the methods of 
cotton marketing which have prevailed in the South since cot- 
ton first became a money crop. 

A Helpless Class Growing More Helpless 

The southern cotton grower is today in the hands of his com- 
mercial enemies. Conditions are apparently growing worse; 
not better. Tenancy is increasing ; not decreasing. One man 
from my state, ordinarily one of the most level-headed of our 
students of farm affairs, said recently, ''There is no solution. 
The concentration of land ownership and of monetary control 
will continue until our common people will have reached the 
present condition of European serfdom." 

Tenancy is increasing, and with that increase there is found 
another increase in the class of tenant farmers who feel that 
they are being ground under the heel of oppression. They 
know that they should not be asked to pay 40 per cent or more 
on chattel loans. They know that they should never be asked 
to pay from 50 to 100 per cent advance in price on supplies at 
the store merely because they cannot pay cash, and they are 
rebelling more and more against the prevailing custom which 
says that they must raise cotton because it is the one crop 
of all crops which neither can be eaten nor stolen nor given 
away before the landlord and the banker and the country store- 
keeper and the cotton buyer have each taken a bit out of the 
proceeds — and when these portions are taken there is usually 
nothing left. 

And so the tenant skins the land and runs down the place 
and robs the landlord whenever he can and sneaks away in 
the middle of the night to avaid paying his store bill. And so 
the landlord, the merchant and the banker — these 3 — ^knowing 
that they face heavy losses at the hands of the shiftless ten- 
ants, put up the prices of all commodities, including that of 
money, in an effort to discount these losses and so make the ul- 
timate profit for which all of us are striving in our business op- 
erations. 

It's a terrible circle of discontent which is gradually becom- 
ing a storm center for radicalism in all its forms, and the mut- 



470 MARKETING AND FARM CREDITS 

terings of the storm can even now be heard by those whose ears 
are attuned and whose minds are keyed with sympathy and un- 
derstanding. 

I would not sound this somber note did I not believe that 
the dawn of a new day is at hand. I do not agree with my friend 
who think that European serfdom is in prospect for the com- 
mon folks of America. There is always justice in the mass 
when time is a factor. Community thinking always results in 
community power. And there has never been a time in these 
United States when so many men of all classes and kinds and 
occupations gave community thought to a single problem as 
at this day and hour when the evils which strike at the root of 
America's farm prosperity have forced themselves on the at- 
tention of the people at large. 

"We are not all agreed on a remedy, nor do I believe that any 
remedy, taken by itself alone, will ever solve the problem. 
Community thinking, however, and the composite action which 
always follows that thought as surely as day follows night, will 
in time make of the southern tenant farmer a man whose value 
to the community will be measured only by his value to him- 
self. 

Where the Responsibility Bests 

There is real encouragement in the changing trend of thought 
among those who financially control the tenant farmer's des- 
tiny. Some of them are coming to see that, while all classes are 
at fault, including the farmer himself, a greater responsibility 
rests on the folks who own the land and lend the money and 
furnish supplies than on the tenant who farms the land. They 
may be no more to blame than the farmer himself for the finan- 
cial evils which affect so great a stretch of God's fair country; 
but they are coming to see that the possession of money or of the 
things which money will buy, always brings power and that, 
along with power, comes a great responsibility to use it rightly ; 
not only for the accretion of greater wealth and still more 
power, but also for the benefit of humanity and for the devel- 
■opment of the community in which they live. 

Needed Remedies by Legislation 

Legislatively speaking, there are some things which we of the 
Southwest believe to be necessary for the development of farm 
prosperity in the southern cotton sections. The first is a state 



CARL WILLIAMS 471 

anti-usury law, uniform, if possible, in all the states, which 
will reach both banker and country storekeeper on a fair basis 
that will admit of its full enforcement. Anti-usury laws of to- 
day are dead letters in the Southern States. Such laws will re- 
strict credit ; but they will also cheapen credit, even at the ex- 
pense of driving out of business those smaller country banks 
whose owners insist that they cannot earn a profit on less than 
an average interest rate of 15 per cent a year. 

The second is a graduated land tax which will make it less 
easy for the absentee landlord to control vast bodies of agri- 
cultural land with profit for himself and penury for his tenant 
people. 

The third, and this directly affects the cotton marketing sys- 
tem which we have discussed, is a uniform bonded warehouse 
law in each of the Southern cotton states, with a uniform ware- 
house receipt which shall be, and can readily be, regarded as 
Class A collateral in any money market of the world. Then the 
cotton farmer who is today forced to sell his cotton on a low 
market to cover his 40 per cent summer loan can store his own 
cotton for a nominal charge per month and use his warehouse 
receipt as collateral for the 8 per cent loan which is today so 
readily given to the cotton buyer whose warehouse facilities 
are organized. The only important things today standing on 
guard to bar the cotton farmer's entrance to financial freedom 
are the facts that he deals in small lots and that his so-called 
warehouse receipt is considered of no value because of the lack 
of safeguards which would be thrown around it. 

Need of Cooperation in South 

This warehouse law, or some other law dealing with special 
phases of the same subject, should also provide for official cot- 
ton classers at every ginning center, and thus give the farmer 
an official opinion concerning he grade and class of his own 
cotton before he is forced to meet and bargain with the buyer 
who so easily bests him in their dealings of today. 

To encourage cooperative organizations in southern states; 
to continue our present campaign for diversification in the 
South, that the living may be made at home and the production 
cost of cotton thereby lessened; to work for a system which 
will postpone the time of maturity of cotton debts and give the 
farmer himself more time in which to turn around after his crop 
is ready for market; to insist on a revision of our country 



472 MARKETING AND FARM CREDITS 

school curriculum until it shall furnish a country education for 
country boys and girls and so the better prepare them for the 
country life which 99 per cent of them are predestined to lead ; 
to establish a national rural credit system which will make it 
more easy for men to' purchase and to pay for their own homes; 
not one of these things, alone, will solve the problem. There 
is no panacea for poverty, either in country or in the city. All 
of these things, however, together with other remedial measures 
which are sure to come out of the combined community thought 
of the country will, in my belief, bring a composite solution 
which will lift the whole agricultural South to a higher level. 

Legisation alone will not do it; for the enforcement of law 
depends too much on the spirit of the people. 

Agitation will not do it; for out of agitation often comes a 
horde of other evils which are worse than those they attempt 
to displace. 

Education, in time, is more likely to be the certain permanent 
cure for every ill of the body politic ; for the people of a state 
or of a nation, when they know what they want, can get that 
thing, regardless of opposition, if thej^ want it enough to work 
for it as well as to talk about it. 

These 3 things, education, agitation, legislation, will serve 
any rightful purpose for which we intend them ; but the great- 
est of these is education ; not for the banker alone, nor for the 
storekeeper, the landlord and the cotton buyer; but for the 
cotton farmer himself most of all, that he may see the heights 
above him and may be moved to climb instead of sitting inert 
in the valley below and deluding himself with self-pity into an 
attitude which is not helpful to the community welfare. 



CHARLES L. STEWART 473 



THE LAND OWNING FARMER OF THE NORTH 
AND HIS NEED FOR PERSONAL CREDIT 

Chaeles L. Stewart 
College of Commerce and Business Administration, University of 

Illinois 

About 70 in every 100 farmers in the North own some of the 
land they farm. Sixty of the 70 own all they farm. Their 
farms average 124 acres of which 81 are improved. Twelve 
per cent of the northern farmers own about half of the land 
they operate. Their farms average 223 acres, and 159 are im- 
proved. On the average, the land owning farmer of the North 
owns about 120 acres, two-thirds of which is improved. There 
are approximately 2 million such farmers. 

Relation of Mortgaging to Personal Credit 

Two in every five of the land owning farmers of the North 
operate land encumbered by mortgage. This fact, however, 
does not indicate that they have no short-time indebtedness in 
addition. Personal credit is as indispensable to the 875,000 
northern owners with farm mortgages as to the 1,200,000 own- 
ers free from mortgage encumbrance. 

Mortgage indebtedness and personal indebtedness are but the 
2 parts of the whole agricultural debt. A restriction or modi- 
fication affecting mortgage credit will have an effect on personal 
credit, and vice versa. 

Legal restrictions on the power of banks, national and state, 
to loan on farm mortgage security, are found throughout the 
North. In North Dakota, for instance, it is estimated that the 
power to loan on real estate is about $5,000,000. The farm 
mortgages in effect total about $50,000,000. Under such cir- 
cumstances banks loan on the personal note of the farmer, hav- 
ing the note secured by a mortgage on his land. As a result 
of this indirect practice, the statistics of personal indebtedness 
are inflated. "What is more important, the rates on loans made 
personal in this way are higher. 

In order to understand the need of the northern land owning 
farmer for personal credit, we must consider the things for 
which he has to pay out money. 



474 MARKETING AND FARM CREDITS 

The Objects of Personal Credit 

Personal credit is sought by northern farmers for meeting a 
larger or smaller proportion of the expenses of making the crop, 
of running the household, of purchasing stock and equipment, 
and for meeting the other temporary financial demands of farm- 
ing. Let us analyze the nature of these demands, and see 
what changes have been taking place in them. 

Not least important in the items of farm expense are the 
taxes and other forms of assessments for the support of local 
institutions, such as churches, fairs and the like. Both taxes 
and assessed contributions have risen in the country, and no- 
where is the burden greater than in agricultural communities 
of the North. 

The payment of wages to farm hands has assumed growing 
importance as a cause of borrowing. In the first place, wages 
have risen. In the second place, payment in produce has largely 
disappeared. Finally, farm hands are not letting credits gi'ow 
on the books of their employers so much as they used to do, but 
instead are depositing or otherwise making use of their wages. 
The amount of labor used on the farm has not decreased, 
though the increased employment of labor-saving machinery 
might lead one to think so. In the United States, as a whole, 
there was a falling off between 1900 and 1910 in the number of 
acres cultivated by an individual in agriculture. One person 
handled 82 acres in 1900 and onlj^ 71 in 1910, a decline of 13 per 
cent. Considering improved land alone, a single individual 
handled 40.4 acres in 1900 and only 38.7 in 1910 — a decrease of 
4 per cent. It appears, therefore, that the use of machinery 
has not reduced the amount of labor necessary. All factors 
considered, the farmer has to give more attention to his labor 
account. This means that most farmers have to borrow money 
to pay the hands before the crop is sold. 

Operating oMTiers of the North sometimes have other opera- 
tors handling a part of their land. In 1900 approximately 25 
per cent of the farms rented in the North were owned by men 
possessing 2 or more farms. It would not be safe to assume 
that the percentage is smaller now. Most owners of two or 
more farms are not operating a farm themselves. Some are, 
however, and these, probably more than non-operating owners, 
stand financially behind the tenants or managers on their land. 
This is especially true where the owner is helping a son, son-in- 
law, or other favored person to get a start. Until financially 



CHARLES L. STEWART 475 

established, such, operators have to depend -apon. the owner for 
help to meet current expenses as well as the expense of equip- 
ment. Some lines of farming require such cooperation between 
owner and tenant as a regular thing. In dairy regions share 
tenancy requires a constant investment by the farm owner to 
the extent of one-half the stock, except work animals, and also 
puts the owner under the necessity of paying half the current 
expenses, except labor and board. The managerial system re- 
quires a large investment on the part of the owner as well as a 
constant and heavy demand for current expenditures. These 
demands for advances to tenants and managers require an in- 
creasing amount of personal indebtedness. 

Machinery Purchase Introduces New Type of Credit 

The purchase of implements and machinery for the farm an 
owner operates or for the farm he helps another to operate 
frequently creates a large demand for loans. Farm machinery 
is usually owned privately, though an increasing amount of it 
is cooperatively owned. Machinery owned by farmers is in- 
creasing in variety of forms and has not been growing cheaper 
in any great degree. The value of implements and machinery 
per acre increased from 50 to 65 per cent in the Northern 
States between 1900 and 1910. This is due not only to the 
greater value of field machinery, but also to the greater utiliza- 
tion of automobiles, gas engines, tractors, engine-driven ma- 
chines, grain dumps, and the like. Cooperative ownership is 
appearing among farmers operating farms of the medium size. 
Traction engines, grain separators, and shellers are the princi- 
pal machines owned cooperatively. Since these machines are 
often bought on the joint note of the cooperators, we have here as 
in cooperative organizations for some other purposes, a form 
of collective security given by American farmers independent 
of European models. The purchase of machinery on credit has 
been increasingly significant in the North. 

The use of mineral fertilizers has been mainly confined to the 
eastern group of the states under consideration. The spread of 
county agricultural organizations will doubtless result in in- 
creased expenditures throughout the entire North. Where pro- 
moted by the county or district agents, cooperative purchase of 
fertilizers is becoming an important part of the cost of farming. 

The expense of putting up buildings on farms has been in- 
creasing. Considering farms of all operators the value of build- 



476 MARKETING AND FARM CREDITS 

ings per acre of improved land in 1910 ranged from $9.51 in 
the North Central States west of the Mississippi river to $46.37 
in New England. The increase over 1900 was between 50 and 
60 per cent. The value of buildings per acre is much higher in 
the case of farms operated by owners than in the case of farms 
run by tenants. The percentage of difference was 60 per cent 
in 1900 and 70 per cent in 1910. The land-owning farmer is 
subject to considerable expenditure, therefore, whether put- 
ting or maintaining buildings on the place he operates or on 
the farms he has others operate for him. It should be noted 
that the growing expense connected with farm buildings is not 
due solely to better equipments. The price of lumber rose 
fully a third during the last 15 years. Though substitutes 
have been employed in the place of lumber, it has been impos- 
sible to keep the cost of material down. The labor entering 
into the cost of construction has been more expensive in recent 
rears, especially if brought out from town. In some respects, 
however, the structures are better. Urban ideals of construct- 
ing dwelling houses have influenced farmers in many parts of 
the country, resulting in more expensive homes. All of this 
means that when a farmer puts improvements on his place, he 
is likely to need a greater extension of credit than in the past. 

Buildings, implements and fertilizers, though often the occa- 
sion of short-time credit transactions, ordinarily assist produc- 
tion over a long period. In this respect they are to be con- 
trasted with the items connected with household supply and the 
supply of other commodities. Oil, for instance, has been as- 
suming greater importance in recent years in the list of the 
farmers' regular expenses. The cost of living is higher for the 
farmer as well as for others. These developments mean that 
the farmer must obtain more credit for current accounts. 

Livestock requires special consideration in any study of per- 
sonal credit among northern farmers. The value of livestock 
on the farms of operating owners in the North increased about 
50 per cent between 1900 and 1910. The incidental expendi- 
tures eonected with the keeping of livestock — veterinary 
charges, the purchase of prepared feeds, the carrying of insur- 
ance, and the replacement of dead animals — all tend to swell the 
farmer's expense account. High prices prevail not only for 
power animals, but for milch cows, breeding stock, and feeders. 
Farmers feeding stock must borrow at every turn, in their pur- 
chase, feeding and care, and in their disposal. Cooperation has 
helped somewhat to facilitate the disposal of livestock, but ex- 



CiTARLES L. STEWART 477 

cept for a little cooperative o^vnership of breeding stock has not 
done so much with their purchase and feeding. 

We may draw 3 conclusions from what has been said. In 
the first place the items of expenditure leading to personal 
credit have been growing and bid fair to continue to grow. In 
the second place, these items arise more continuously through- 
out the year. In the third place, cooperative enterprises need 
credit facilities and are able to provide superior security. 

The Farmer's Income and the Personal Loan Period, 

The more diversified the farming practice the greater the 
probability of an income at frequent intervals. There are very 
few farms, however, that have a regular income. The returns 
from marketing milk, cream, and poultry are subject to less 
fluctuation than the returns from almost any other farm prod- 
ucts. But the milk producer will fijid his butter and cheese 
bringing their income chiefly during the summer, and the poul- 
try farmer will market his eggs mainly in the spring. The 
grain products which figure most prominently in northern ag- 
riculture are usually marketed at the close of the harvest sea- 
son in the fall. This is especially true of threshed grains. 
Bulletin No. 183 of the University of Illinois agricultural ex- 
periment station, just off the press, indicates that it might pay 
better to hold wheat and oats a few months after threshing. In 
the case of corn, according to the bulletin, it is best to market 
before the shrinkage has gone too far. The cattle raised in the 
North are mostly disposed of during the late summer and fall, 
sheep in the summer, and hogs in the winter. 

It is obvious, therefore, that even the farmer with diversi- 
fied operations does not have much income from the early part 
of the year until the latter part of the summer. The periods 
of heavy borrowing are from April to August and from No- 
vember through December. A desire to repay the spring loans 
may be more or less responsible for the heavy sales of small 
grains at threshing time. Some lenders pay too little atten- 
tion to the significance of maturity dates to farmers. The 
more thoughtful lenders to grain farmers, however, have the 
notes fall due in January or February, so that the farmer will 
not feel the pressure of settling at threshing time. 

The holding of small grain on the farm may be expected to 
increase. During recent years as much as 6 or 8 per cent is 
sometimes held on the farm for a year. There seems to be no 



478 MARKETING AND FARM CREDITS 

reason for thinking that holding for such a long time will in- 
crease. But the farmers may be expected more generally to 
hold their grain for a period of a few months. Better roads, 
cooperative storage elevators and warehouses and other such 
factors are favorable to this development. The farmer is en- 
titled to such freedom in this matter as the proper adjustment 
of the terminating period of his loans will give. 

From the point of view of rural finance, the development of 
scientific agriculture means that more investments must be 
made whose effects on production spread over a number of 
years. Such investments properly placed are well made even 
if the place must be mortgaged to get the means. Since Amer- 
ican farmers are reluctant to mortgage their places and since 
the restrictions on mortgage loans limit the volume of mort- 
gages, we may expect many of these improvements to be made 
by means of personal loans. Such loans, though they are tem- 
porary, need to have their terminating time carefully adjusted. 
Otherwise, the advantages of scientific agriculture will be lim- 
ited to farmers who need to borrow least in order to install the 
desired equipment. 

Respecting the period for which personal loans to farmers 
are made, it appears that it is longer than the period for which 
personal loans are made to other classes. Moreover it appears 
to be growing longer. If those in charge of funds subject to 
short-time ending choose to favor the more rapidly turning of 
non-agricultural loans, they may impede the progress of north- 
ern agriculture. 

The Sources of Personal Credit 

The main sources of short-time loan funds in the Northern 
States are the banks, merchants, and neighbors. The prac- 
tice of bori'owing from life insurance companies against accu- 
mulations on policies — a practice inimical to the interests of 
the farm mortgagor in times of financial stringency — seems 
not to be established among farmers. Borrowing from neigh- 
bors has practically disappeared from communities well sup- 
plied with banks. 

Local general merchants carry the accounts of farmers on 
their books for varying periods of time. In newer parts of 
the North and more or less in other parts, the merchants re- 
quire note security for book accounts. In some cases the goods 
are sold at a higher price because sold on credit, while the 



CHARLES L. STEWART 479 

note requires the payment of interest at rates abnormally high. 
One reason why farmers persist in buying on book credit when 
they know it to be somewhat to their disadvantage is that they 
are thereby enabled to keep their credit at the bank unim- 
paired. Under such conditions it is hard to get concerted ac- 
tion on the part of farmer customers in opposing unfair prac- 
tices by these merchants. Without a concerted effort affecting 
similarly all the stores in the community, competition can 
hardly be relied upon to lower prices. Mail order purchasing 
has an influence toward freedom in this respect, whatever else 
may be said about it. On the whole, it is easy to overstate the 
seriousness of the sins of local merchants in the rural commu- 
nities of the North. In backward parts, however, it is possible 
to find some evils of this kind. 

The book credit extended by repair shops, veterinary physi- 
cians, family doctors, dentists, and the like, while no small 
item, works to the disadvantage of farmers in very few rural 
communities. 

Buying Machinery on Time 

There has been a growing practice on the part of local deal- 
ers in implements and machinery to accept farmers' notes 
which the wholesalers or manufacturers are prepared to as- 
sume. The notes are drawn so as to bear interest bofth before 
and after they mature. They are made for amounts based 
on the quoted price. If one chose to pay cash, however, he 
would be able to get somewhat of a discount. Nevertheless, 
this practice has many things in its favor, some of them from 
the farmer 's point of view. The rates on the loans are usually 
the same as those prevailing at the local banks. The farmer 
feels free to buy more than if he had to consult the banker 
about it. The dealer is able to reduce the proportion of bad 
debts by putting note security behind a portion of his time 
sales. The manufacturer is usually able to grant credit for 
a longer period than the local banker can. In case the ma- 
chiQery should be thrown back on the creditor, the manufac- 
turer would be able to get more out of it than local creditors 
could. Cooperative farm machinery societies frequently pur- 
chase their outfits by this kind of credit arrangement. 

Book credit to farmers for the purchase of machines seems 
to be undergoing a revolution. The automobiles have stimu- 
lated cash purchases in a manner quite unprecedented. Gas 



480 MARKETING AND FARM CREDITS 

tractors are being sold in much the same way. The result is 
to increase borrowing at the expense of book credit. This is 
due to decreased purchases of other farm machinery on the 
one hand and the growing habit of cash purchases on the other. 
To be contrasted, with the local general merchant and the 
implement dealers in their methods of supplying farmers with 
credit are the factors, or commission merchants. The latter 
have a practice of furnishing farmers with funds for definite 
purposes. When livestock is concerned the money is to be 
used for purchasing lean stock and for getting it into a condi- 
tion for marketing. The loan is on a note secured by a chattel 
mortgage. Often the commission house makes arrangements 
with the railroads so that the freight may be paid at one time 
from the place where the stock is first bought directly to the 
yards where the stock will be sold, with stop-over privileges of 
several months at the point nearest the farm. Some well estab- 
lished commission firms trace a large part of their profits to 
loan transactions. The factors receive the farmer's notes and 
are able to discount them at the metropolitan banks. The 
transactions can be arranged with maturity dates coming at 
intervals frequent enough to enable the factors to get the best 
short-time rates at their banks. To the farmer the program 
offered by the factor is simple and complete, and it enables 
him to use his bank credit for other purposes. 

Bankers Dominate Northern Farm Credit 

Significant as these various agencies for dispensing credit 
to farmers may be, the fact still remains that over half the 
credit business of farmers is cared for by bankers in the typical 
parts of the North. The bankers affording credit to farmers 
have sometimes been accused of discriminating against the 
farmers. Some forms of alleged discrimination are not really 
discriminative. Because a bank chooses to specialize in a class 
of business that is non-agricultural is no evidence of discrimi- 
nation. Specialization by individual banks in one line or an- 
other cases no reflection on the other lines. Even so, on this 
basis, it would be hard to say that the farmers are discrimi- 
nated against. Perhaps more banking institutions have their 
doors open to farmers than do not, and the farmers constitute 
only about a third of the persons engaged in gainful pursuits. 
Another form of discrimination is said to lie in the fact that 
banks are insufficiently abundant in number in some parts of 



CHARLES L. STEWART 481 

the agricultural North. If a system of branch banking pre- 
vailed in the United States, localization of banks would be a 
ground for charging discrimination. It is only natural, how- 
ever, that banks should be far apart in parts of the country ag- 
riculturally under-developed. 

That some banks have an aversion to agricultural loans is 
not hard to explain. There are seasonal aspects of the farmer's 
banking that mark it as peculiar. Relatively little borrowing 
is done by northern farmers from January to April and in 
September and October. In the second place, farmers want 
their personal loans to run longer than other bank patrons, as 
a rule. "While this means a smaller amount of negotiation by 
the bankers to place their money, it often means that the bank- 
ers must pass by other patrons whose more rapidly moving 
businesses would enable them to pay higher rates on loans run- 
ning for shorter periods. In the third place, the farmers 
usually repay their loans at the time of the year when bankers 
must handle low rate commercial paper, if anything at all, to 
occupy their funds until the new demand arises from the farm- 
ers. In the fourth place, farmers frequently do not have de- 
posit checking accounts, but deposit on time so as to get a little 
interest. In all these respects, the banking practice of the 
merchant, salaried, and professional classes has points of su- 
periority over that of the farmer. 

By way of conclusion from this survey of the sources of per- 
sonal credit, it can hardly be doubted that the farmer feels 
that in too many cases there is an objection on the part of the 
banker to lending him money beyond a certain amount. In 
many cases, doubtless, it is to the farmer's interest that it 
should be so. The farmer is interesting himself in the credit 
devices of implement dealers, commission houses, and others, 
feeling that through making use of them he' will "not impair 
his credit at the bank," or that he will be able to "use his 
bank credit for other purposes." In the second place, it must 
be agreed that there are districts in the North where the rates 
on personal loans are strikingly high. These high rates, how- 
ever, are largely accounted for by elements of risk which can 
only be eliminated by the population becoming more stable, by 
farming methods being standardized, by local capital being 
accumulated, and by soil and climatic conditions being more 
successfully coped with. In the third place, taking the North 
as a whole there seems little reason for arguing that there 
should be more organizations for dealing in personal farm 

31 — M. F. C. 



482 MARKETING AND FARM CREDITS 

credits. The number of existing sources of credit is adequate 
in all but a few districts. 

Some Constructive Proposals 

The banks could do, and are doing much to remove the criti- 
cism directed against them. There is much to be done yet by 
bankers in cooperating with cooperative organizations. The 
existing cooperative organizations of farmers are not com- 
petitors of the banks. They can give security of an extraordi- 
narily good character. The banks might well try to give them 
especially good terms. In the second place, bankers should 
take more care to put the dates of maturity where the farmers 
will be compelled to make the least modification in their pro- 
gram of marketing. In the third place, the banks should study 
farm investments, cooperating with farmers in the keeping of 
books. To bring this about it is necessary that more scientific 
studies be made in typical areas. It is equally necessary, how- 
ever, that the local banker have more intimate knowledge of 
the farms of his community than is derived while traveling at 
a 30-mile clip in an automobile. There is a need, on the 
other hand, for the farmer to know more of the fundamental 
principles of banking in relation to his business. 

Another source of help in solving the problem of personal 
credit for the northern farmer is the legislator. The federal 
reserve act enables banks with a capital of $25,000 or more to 
take advantage of the federal rediscount system. A bank 
having rediscount privileges may send to one of the twelve 
regional banks any amount of notes, drafts, and bills of ex- 
change. Such paper, when agricultural in character, can be 
handled by any of the regional banks, in an aggregate amount 
equal to the percentage of its capital stock to be fixed from 
time to time for each federal reserve bank by the federal re- 
serve board. The banks with a capitalization less than $25,000 
are state and private banks. They are about half of the banks 
in the Northern States. It has been suggested that rediscount 
privileges might properly be extended to banks having less than 
$25,000 capital. Objections to sudh a step become greater as the 
minimum is lowered, especially if put lower than $10,000. But 
the admission of smaller banks to rediscount privileges would 
be beneficial to agriculture in the districts newly opened or 
rediscounted is almost insignificant. The 6 month maximum 



CHARLES L. STEWART 483 

period for which agricultural paper may run will doubtless 
prove to be too short, and may have to be raised, at least for 
a certain proportion of the loans. 

Exemption laws in some cases increase the risk to the lender 
by making it easy for a borrower to evade the payment of his 
debts. Such exemptions aften breed carelessness and extrava- 
gance on the part of some borrowers. 

The repeal of mortgage tax laws or their modifications so as 
to avoid double taxation may enable some loans to be made on 
mortgage security that are now made as personal loans, to the 
detriment of the borrower. 

Special loan companies, such as cattle loan banks, are re- 
stricted in their ability to incorporate in many states. Per- 
haps a federal incorporation of such banks would help to stim- 
ulate the breeding and feeding of livestock in the country. 

It seems unlikely that a separate system of banks is needed 
to furnish the northern farmer with personal credit. Legisla- 
tion should be passed permitting the organization of coopera- 
tive credit societies if the farmers want them. Whether they 
will be organized depends upon a number of considerations. 
Ft^rmers will hesitate to form such societies because of aversion 
to the liability, the publicity of financial standing, the mutual 
spying, and the demand on time involved. With country bank- 
ers in a position to learn and sympathetically to cooperate with 
the business of farmers, there should be little occasion for bolt- 
ing on the part of farmers. 

It should be easier for the bankers to get into close and help- 
ful relations with farmers than for farmers to develop a system 
of cooperative personal credit institutions. In most parts of 
the North the farmers would prefer to be spared the necessity 
of going outside the sphere of their chosen occupation. 



484: MARKETING AND FARM CREDITS 



THE LAND-OWNING FARMER IN THE SOUTH 
AND HIS NEED FOR PERSONAL CREDIT 

LiNDLEY M. KeASBEY 

Professor of Institutional History, the University of Texas 

I am not going to give the address that I was going to give 
this afternoon, because we did much more important things, 
it seems to me, this afternoon, than to listen to addresses. I 
can not tell you how deeply I have been impressed by this meet- 
ing, for all through this meeting, in the atmosphere, has been 
that sort of cooperation, that old clan spirit that used to pre- 
vail in the heroic age. And when one has lived these so-called 
competitive days, which are really coercive, struggling and 
striving for cooperation, to see a body of men from all over 
this country and Canada get together, striking that one essen- 
tial note, cooperation, with all its chords and modulations, is 
indeed inspiring to one who imbibed the spirit 20 odd years 
ago as a student in Germany. "While in Germany I had 
the great good fortune for 3 years to study in the seminary 
of Professor Knabb. That seminary devoted itself entirely 
to the study of the land conditions of Germany and there, as 
an enthusiastic youth, I became more and more imbiaed with 
the splendid spirit of cooperation which I have found so wo- 
fully lacking in this great country of ours. Now that the not 
• of cooperation has struck, I know that it is going to resound 
»down this country of ours,- and after this mieeting I am going 
:;awa,y with full hope in my heart to the South, which has become 
jXDJ adopted country, and where cooperation is just beginning to 
sliow itself about the dark era of slavery. 

In looking back over the history of the world, we find that 
human beings have organized themselves, or been organized 
in only 3 ways. They Ihave been organized along cooperative 
lines — and when civilization started that was the origiaal sys- 
tem. When the land was free and unproductive, power 
counted in the world. We have the great clan days of the he- 
roes, when personal labor, personal power, muscular and men- 
tal, counted. Then we reckoned our fellows in terms of brave 
men and wise men. These brave men and wise men cooperated 
for the good of their elan. Then eame what I call the proprie- 



LINDLEY M. KEASBEY 485 

tary period of civilization, when the land became appropriated 
by the feudal lords, or the landlords, and thereupon coopera- 
tion, such as remained, became an involuntary cooperation, and 
the coercive system of society ensued. Then the commercial 
era offers great possibilities, and that was the incentive of the 
market and the knowledge of marketing. Everybody was 
told to toe the mark and start fair; that competition would 
bring us equality and democracy. This competitive age of 
commercialism we have run through very rapidly in this coun- 
try of ours, and find ourselves face to face with another co- 
ercive age, not feudal coercion this time, but financial coer- 
cion. This competitnon has been succeeded in this country 
by coercion, and the coercion is now exerted not by landlords, 
as in the first instance, but by those who control the money of 
the country. Now that this, second coercive age is to be su- 
perseded by a new age of cooperation, a cooperation where all 
may have and lend money, the great social age that is coming 
before us, therein, I say, lies my great hope. But, in the 
South, where I have gone to take up my permanent residence, 
I find things in such condition that we need the message of co- 
operation more than any other part of the United States where 
I have lived. 

Now, in looking over these conditions in the South, I was 
called upon by the editors of the "New Republic" in New 
York to write as far as I could what the conditions were that 
now prevail in the South. I wrote this short paper in the 
"New Republic" of September 11, and I will read from it, in 
order that you may see just about where we are in the South- 
land today. 

Cotton Basis of South 's Problem 

Now, I say, "Cotton is the single cash crop, and therewith 
also the chief agricultural export, of the South. Add to this 
the fact that the supply of cotton is financially controlled not 
at the centers of exchange but at the actual course of supply, 
and you have in sum the essentials of the existing circulation. 
How this situation has come to exist is still an untold story. 
The end of it all — the fact that financial control has succeeded 
in fastening itself upon the cotton-producing states of the 
South — is evident on all sides. There are statistics also, and 
practical experience besides. These exhibit certain salient 
features, such as absentee landlordism, the tenant system, and 



486 MARKETING AND FARM CREDITS 

SO forth. I shall not attempt to tell the story myself, since 
there are others much better qualified. Among these is the 
Hon. Joseph T. Holleman, of whom the Atlanta 'Constitution' 
says, 'Probably no man is better posted concerning farm con- 
ditions in the South. ' 

''According to Mr. Holleman the situation has come about 
in this way: When the Southern soldiers returned to their 
homes after the Civil War, they had nothing but their land. 
Fortunately in every town and village there were a few men 
who kept up their financial connections with the North. It 
was these men who saved the situation, by buying goods on 
credit and selling them out to the farmers again on credit. 
Under an arrangement of this sort the southern farmers had 
to buy everything that they needed, not only seeds and agri- 
cultural implements, but also food for themselves and for their 
negro employes. Naturally the men engaged in this sort of 
business began themselves to accumulate land, by foreclosure, 
or by outright purchase. These men are today the large land- 
owners and the large cotton producers of the South. 'In every 
county you will find them,' Mr. Holleman says. 'They own 
the banks, the fertilizer plants, the oil mills, the warehouses 
and the big supply stores, and all the important lines of busi- 
ness. They sell the farmer his agricultural implements, his 
fertilizers, his mules; all that he and his laborers wear, and all 
that he and his laborers eat. They also represent non-resi- 
dents, who own large tracts of land, and they control these 
lands and dictate what shall be planted on them. They are 
also in politics, they are members of the legislature, they are 
active in all elections, they have candidates for all the county 
offices, they help elect the mayors of their towns, the solicitors 
of the city courts, the solicitors general, the county judge, the 
judges of the superior court, the congressmen, the governors, 
and the United States senators.' 

"In this trenchant analysis of the existing situation, Mr. 
Holleman shows us quite clearly there are 3 classes concerned : 
free farmers, tenant farmers, and absentee landlords. As for 
the first of these, according to our authority, 'they are not 
more disturbed by the war in Europe than they would be by 
an eruption of the Volcano Vesuvius. Nor are they concerned 
as to whether they can sell their cotton crop. If they get the 
price they want, they sell it. If not, they pile it up under the 
oak trees in their front yards and let it stay there.' Thus, as 
Mr. Holleman savs, 'we need not concern ourselves greatly 



LINDLEY M. KEASBEY 487 

about the real farmers, the independent farmers of Georgia 
and the South, They have demonstrated the fact that they 
can take care of themselves, in good times and in bad times, in 
times of peace and in times of v^ar.' Nevertheless, we should 
concern ourselves seriously about their decline as a class. 
'There are still such farmers left in Georgia and the South, 'but 
says Mr. Holleman, 'you can count them in each county on 
your 10 fingers.' So it is everywihere over the cotton-produc- 
ing area. Even in the state of Texas free farmers are becom- 
ing fewer and further between. Altogether, according to Mr. 
Holleman 's estimate, they number possibly 10 per cent of the 
farming population of the South, 

Tenancy Alarms Georgia Thinkers 

"As for the second class, that is increasing so rapidly that 
from statistics of the United States census Mr. Holleman 
shows: 'In 27 Georgia counties there are 51,033 farm homes; 
34,429 of these farm homes are occupied by tenants, and 16,604 
are occupied by owners. In other words, nearly 70 per cent 
of the farms are occupied by tenants. These are the farms 
that are producing the cotton.' Of the remaining 30 per cent, 
according to Mr. Holleman 's estimate, 10 per cent are occupied 
by independent farmers, this leaves 20 per cent unaccounted 
for. These 'are occupied by owners that are small farmers 
who have never reached the point of independence and who 
follow exactly the same system of farming that is followed by 
the 70 per cent making up the tenant farmers.' Take Texas 
as an example of the new Southwest. In his preliminary re- 
port to the United States Commission on Industrial Relations, 
Special Investigator Charles W. Holman asserts: 'There are 
more than 235,000 tenant farmers in Texas. ' 

' ' Startling as they seem, these figures are fully corroborated 
by Commissioner Calvin of this state, who has gathered to- 
gether the statistics and worked out some calculations on his 
own account. According to Mr. Calvin, 'In 1910 there were 
all told 415,838 fanns in Texas; of this number 195,863 were 
operated by owners and 219,975 by tenants, or 46 per cent by 
owners and 52.6 per cent by tenants.' Assuming that farms 
operated by tenants have gained since 1910 at the same rate 
as between 1900 and 1910, Mr. Calvin calculates that on April 
15, 1915, they must have outnumbered farms operated by own- 
ers by 35,040. Thus taking Georgia and Texas as opposite ex- 



488 MARKETING AND FARM CREDITS 

amples, evidently the tenant farming situation is pretty mncli 
the same all over the South. 

The Tenant of South a Submerged Class 

*'At one time, in discussing Mexico, President Wilson refer- 
red to the down-trodden people of that country as the sub- 
merged 85 per cent. 'Well,' says Mr. Holleman, 'we have this 
submerged class in our own country, but you will notice I have 
raised the percentage. I put it at 90 per cent. About 10 per 
cent of our farmers iare independent, 20 per cent are small 
white farmers oAvning their lands, and 70 per cent are tenant 
farmers. ' 

"That these conclusions are in no sense extravagant is evi- 
dent further from the findings of the federal commission. Says 
Special Investigator Holman on this subject: 'The time has 
come for the people of this government to realize that its land 
inheritance is slipping away, and that ownership is becom- 
ing concentrated into the hands of a limited number of indi- 
viduals. Moreover, the tendency toward further concentra- 
tion is evidenced on all sides. At the same time tenants 
who farm the majority of the southern farms — that constitute 
over half the farms of the nation — are being reduced to the 
statute of wage laborers. In the Southwest the condition has 
become particularly acute, with the rapid increase of tenant 
farmers over home-owning farmers, and an accelerated ten- 
dency toward land ownership.' 

"It is this last — the concentration of land ownership in the 
hands of outsiders, so to speak — that is fundamentally respon- 
sible for the existing situation. ' If, ' ]\Ir. Holleman writes, ' one 
of these owners lives too far away to look after renting and 
to attend to the gathering of the crop and the collection of 
rent, some local man is an agent for the purpose. This local 
man is certain to be one of the prominent business men in the 
city, the town, or the village nearest the farm. This local 
agent, of course, looks first to making a good rent contract 
for the owner. When that point is accomplished, then he sees 
to it that, in some way or other, the handling of all the cotton 
produced on that farm should come through his store or his 
bank. He sees to it that all the fertilizers that are brought 
for this farm, all the mules that are purchased for this farm, 
all the mules that are purchased and all the farming imple- 
ments that are used on this farm, and that all the supplies to 



LINDLEY M. KEASBEY 489 

the tenants on this farm, are handled by him. His only idea 
is to make the farm produce cotton, and he will attend to every- 
thing needed on the farm, get the rents for the owner, and 
make a commission, or a sales profit, on everything that is 
bought for the farm or sold from the farm. ' As for those that 
live close at hand, in the cities and towns of the South, they 
are business men for the most part, ' bankers, merchants, own- 
ers of oil mills, cotton factories, fertilizer plants,' and so on, 
as Mr. HoUeman says, together with 'rich. lawyers and wealthy 
physicians, superior court judges, members of Congress, and 
other classes, whose business training and business enterprises 
are based solely on cotton. They know that real farming can- 
not be conducted by them. ' To become real farmers these men 
would have to 'go out in the country, live on the farms, and 
look after the cultivation of the land, the growing of grain 
and hay, the raising of livestock. This sort of farming re- 
quires constant and intelligent attention. Cotton farming on 
be done by any sort of a poor white tenant and any sort of a 
negro. All these poor tenants and negroes need is to have a 
little direction from town in the spring time, and arrangement 
by which all they eat, and all their stock eats, is furnished to 
them. Then they can produce the cotton and carry it into 
town in the fall, where the lord of the manor will be ready to 
take it, sell it, pocket the lion's share, and let the poor white 
tenant and negro tenant have just enough to keep him alive 
until next year's crop comes in. These men give no thought 
to the building up of the land but milk it from year to year 
for every ounce of cotton it will produce. This being the case, 
the single-crop system is evidently not the result of shiftless- 
ness on the part of the farmers; on the contrary, the single- 
crop system appears to be imposed from above by the absentee 
landlords." 

Cotton Crop of South Controlled by Oligarchy 

The foregoing statements, based upon observed facts, sup- 
ported by official figures, and issued in all temperance by those 
best qualified to speak on the subject, substantiate the conclu- 
sions from which I set forth : The cotton crop of this country 
is controlled, and that, too, at the source of its supply. Not, 
as it should be, by the staple growers themselves ; nor yet, as 
it might be, by the federal or state governments concerned; 
but, as it certainly should not be, by a comparatively small 



490 MARKETING AND FARM CREDITS 

group of individuals composing the so-called cotton oligarchy 
of the South. The interests of these individuals are not in 
the first instance agricultural, they are fundamentally finan- 
cial, and from the standpoint of the staple growers, altogether 
alien, if not actually foreign in character. Thus, in the last 
analysis the situation seems to resolve itself into a clear-cut 
issue between financial exploitation on the one hand, and ag- 
ricultural production on the other. The natural resources of 
the South are such as to stimulate productive activities, not 
only along agricultural, but also along industrial and commer- 
cial lines. Under our existing exchange system, however, 
there is a condition precedent to be considered: in order to 
undertake productive activities it is necessary to secure capital 
cheaply and reasonably. Yet the available capital appears to 
be exclusively controlled, and those in control seem inclined 
to exploit. Hence the existing deadlock between exploitation 
and production, resulting in the single-crop system and the 
financial oppression of the South. Evidently to break this 
deadlock a twofold campaign is required — a negative campaign 
against exploitation, and a positive campaign for production. 

In Texas both these campaigns are already inaugurated, 
along what seem to me the correct strategic lines, under the 
able leadership of Governor Ferguson, or Farmer Jim, as he is 
popularly known. The first thing necessary in the negative 
campaign is to disrupt the financial oligarchy; this done, the 
productive resources of the state will be opened to all the in- 
vestors of the financial world. Such was the underlying pur- 
pose of the Gibson insurance bill, which failed unfortunately 
in the last legislature. But, as I understand it, the ill-fated 
Gibson bill was only the first gun in this negative campaign 
against exploitation; others will soon be fired that will fetch 
their mark. 

But suppose, after the oligarchy is disrupted, the exploiters 
should reorganize their financial forces along national or su- 
pernational lines? In such case it would be necessary to 
bring forward and strengthen the fiscal forces of the state. 
Governor Colquitt's plan in this connection was to establish a 
state agricultural bank, which should land its funds directly 
to the staple growers against cotton as security. The diflSculty 
is that no single state is strong enough financially even to regu- 
late, much less to control the cotton situation of the entire 
South. Nor is it necessary for any state to proceed single- 
handed. That is the function of the national goveirnment. 



LINDLEY M. KEASBEY 491 

and the federal reserve act explicitly provides for just such a 
contingency. One of the prime features of this act is to mo- 
bilize federal funds and place them where they are most re- 
quired. 

Education of Exploited Is Needed 

But to proceed against the exploiters is only one part of the 
proposed campaign. To attack, and even overcome the finan- 
cial oligarchy, is not of itself enough; it is necessary also to 
educate and organize the exploited. In Texas particularly, 
whose population is composed of so many diverse and in some 
eases discordant elements, it is not enough to relieve the people 
from the pressure of exploitation; they must be educated also, 
and organized along productive lines, in order that they may 
be able to take advantage of their m;agnificent natural re- 
sources. 

Like the negative campaign against exploitation, this posi- 
tive campaign for production is also inaugurated in Texas, and 
well on its way under the able administration of Governor 
Ferguson. In the first place there is the tenant farmer's 
plank in the governor's political platform, which has since 
become incorporated in the laws of the state. According to 
this statute no landlord is entitled to more than a third of the 
cotton or a fourth of the corn, and bonuses are strictly ex- 
cluded. So the tenant farmer has now at least a chance to 
succeed. In the second place there are the rural school law 
and the compulsory educational bill, which not only render it 
possible, but even make it obligatory for the children of the 
country districts to attend school. It will be interesting to 
observe how these laws operate when it comes to cotton-picking 
times when the children are required in the fields. Then again, 
diversified farming is not only encouraged, but also materially 
aided by both state and federal educational agencies; indus- 
trial enterprises are already instituted, transportation facili- 
ties are being extended throughout the state, and from these 
commercial expansion is destined to proceed. 

Now, with the negative campaign against exploitation I 
shall save nothing to say in these few remarks with which I 
am to conclude. What 1 am interested in is the positive cam- 
paign for agricultural production. 



492 MARKETING AND FARM CREDITS 

Analysis of Production 

Now, if you will permit me a moment or two of economic 
analysis, production is carried on by productive powers. There 
are only 2 fundamental productive powers. One is personal 
power, labor, muscular and mental, and that is the only pro- 
ductive poAver that belongs by natural right to man. That is 
a power which is intrinsic. It gets at the man himself. The 
other fundamental productive power is the physical power 
which is derived from the land, and that physical power again 
is mechanical and generative in character. Now, as the good 
philosopher Luke said, ' ' Let labor max M-ith the land so that the 
land and the labor shall build together." But under our com- 
mercial system there is a third power which we call capital. 
So far as I am able to analyze it, capital consists of 2 phases, 
or 2 parts, like 2 sides of a shield: On one side capital is 
selling power and selling power is embodied in goods and 
in services. On the other side of the shield, capital is pur- 
chasing power, and purchasing power is embodied in coin and 
gi-eat instruments. Now, in order to increase the selling power 
of the southern farmer, a number of courses or lines are neces- 
sary' to be pursued. In the fii'st place, to increase selling' 
power diversification is in order and diversification is a very 
difficult thing in the South. You cannot diversify in the cot- 
ton belt ; you cannot diversify in the rice belt, and there are 
other states of the same kind where diversification would be 
absurd. It is just as absurd to diversify in the cotton belt 
as it would be to go to Burgundy and say, ''Pull up these 
vines." Diversification is very limited through the South be- 
cause of the cotton belt and other belts. To the extent that 
diversification is possible, that, of course, will increase the sell- 
ing poAver. Selling power will be increased again by stand- 
ardization, and generally through these cooperative movements 
which we have been speaking about today ; cooperative market- 
ing, cooperative credit and the cooperative warehouse, and re- 
ligion and the rest. 

But my subject was not increasing the selling power, but 
how are we going to provide for an increase of purchasing 
power on the part of the land owning farmers of the South. 
According to Mr. HoUeman's estimate, these land-owning 
farmers of the South constitute 30 per cent. Ten per cent of 
these are absolutely independent and 20 per cent are depend- 



LINDLEY M. KEASBEY 493 

■ent. It is really for this 20 per cent of dependent land owning 
farmers that our help is required. 

Now, if you could conceive of the system of exchange in the 
form a great wheel, you would find that at the hub of this 
wheel is the financial center. So (far as the South is concerned 
the hub of our wheel of exchange is in New York, because we 
do our financing through the East, The spokes of this wheel 
constitute the agricultural periphery, as it were. Along the 
■spokes of this wheel from the tire, we will say, to the hub, you 
should conceive of a series of reservoirs or standpipes. Now, 
capital in the form of purchasing power, coin and credit, con- 
stitutes one fluid fund. The heavier part of that fund, the 
coin, will sink to the bottom; the lighter portions, the credit, 
will rise to the top. Under our commercial system the money, 
the purchasing power flows in easily from the southern agri- 
cidture periphery toward the financial center in New York, and 
certain amounts of this purchasing power are stopped and are 
held by these storage tanks, or standpipes all along the way. 
This fluid fund flows naturally from the agricultural periphery 
to the financial center, but this fluid fund or purchasing power 
does not flow in the opposite direction toward the agricultural 
periphery. In other words, the fluid fund will flow down hill 
to the financial center but it will not flow up hill toward the 
agricultural periphery. The result is that we, in the South, 
have to pump this fluid fund up, and we pump it up with high 
rates of interest, commissions and fees of all kinds. Capital 
must be made to return from the financial center to our south- 
ern agricultural periphery. 

Cooperative Credit Is Necessary 

Now, how can it be made to return to the agricultural peri- 
phery? It cannot be made to return under our existing profit 
system. It is not profitable to bring this capital back to the 
South except when the interest charges are practically pro- 
hibited. "We shall have to introduce a new principle to bring 
this capital from the East, or the center, to the South, or the 
periphery, and that new principle is the principle which we 
have been emphasizing here in this meeting. That is the prin- 
ciple which was established in Germany with the Landschaft 
and with the Raiffeisen credit bank; that is, the principle of 
service rather than of profit. The only question is, who shall 
render this service? Now, the ideal way of having this ser- 



494 MARKETING AND FARM CREDITS 

vice rendered would be through these cooperative credit 
unions. Therefore, I agree thoroughly with Mr. Herrick, that 
the ideal way is to establish these credit unions of the agricul- 
tural periphery and through this ser\'iee system draw the cap- 
ital out from the financial center to the agricultural periphery. 
But the difficulties in our way in the South are, at the 
present time, almost insurmountable. In the first place, 
we have the racial difficulties. We have there, farmers 
in Texas, whites, negroes and Mexicans. Cooperation under 
these conditions with racial lines between is very difficult in- 
deed. To confine ourselves to whites entirely, there again you 
have colonies of the different nations, Germans, Swedes, Bo- 
hemians and the rest. Cooperation here is difficult, wherever 
these national lines overlap. 

What we should do would be to encoiu'age cooperation and 
the establishment of these credit imions throughout the South. 
But it may be that for the present we shall have to have this 
encouragement from the government. I can conceive of state 
laws whereby the state banks shall be encouraged to provide 
such cooperative facilities. Such was the idea of our recent 
governor, Colquitt, in the matter; to allow tJie state banking 
system of Texas to provide these agricultural banking facili- 
ties. The other way is to have the national government lend 
us assistance by this modification of the national banking law 
that was spoken about this morning. And. while I have not 
made up my mind on the subject at the present time, I am pro- 
visionally inclined to believe that help for the South must come 
primarily through the national government. The national 
government has provided for years for the delivery of letters, 
and now packages, of all kinds, to the personal address of the 
farmers through the rural free delivery system. Surely, such 
an organization as that ought to provide a similar means to 
bring the farmers together in some kind of a great organization 
and thus help them to band themselves together into credit 
unions which will provide them with the necessary purchasing 
power to carry on their productive acti\'ities. 

It is along these lines, along the lines of cooperation, state 
aid, and national aid, that I think the solution of our serious 
problems in the South will be found. 



INDUSTRIAL COOPERATION 
OFFICIAL BUSINESS 



WHAT WE ARE TRYING TO DO WITH THE 
MONTCLAIR COOPERATIVE STORE* 

Emerson P. Harris 
President, Montclair (N. J.) Cooperative Society 

From the producer who desires to sell, to the consumer who 
desires to buy, the channel would seem to be direct, down grade 
and short, and it goes without saying that in the interest of the 
producer, the consumer and society in general, this should be so. 

But, an analysis and examination indicate that this channel 
has been deflected and dammed to the cost and detriment of both 
producer and consumer and there is a very general suspicion 
that this is due to the fact that the traffic is in alien hands, hav- 
ing no interests in the producer or the consumer. Not that we 
employ any malice or conspiracy on the part of the middle man 
who is in possession of the machinery of distribution, for he, like 
you and ime, is engaged in making an honest living by methods 
which he inherited but did not create. Nevertheless, the chan- 
nel seems to have become twisted and tortuous for no apparent 
reason, except to collect tolls and since we cease to worship at 
the shrine of competition which we expected to protect all our 
interests we are increasingly ill at ease and to this fact is due 
the growing belief that the initial steps in distribution should 
be controlled by the producer and the final steps by the con- 
sumer, each serving his own' best interests. 

There may well be some tunnelling and dredging to make 
straight and free this channel, but with the producer working 
from his end and the consumer from his, the tax will be slight in 
proportion to the great gains in prospect. 

When a statement has been made showing the enormous ex- 
pense of transferring the commodities from producer to the 
consumer only half the story has been told which constitutes 
the problem of the consumer, for his indictment against the 
present system relates as much to its failure to perform its 
proper service as to the excessive expense. 

There are believed to be valid reasons why the consumer has 
a right to look to the distributive system to aid him in making 
such selections of products as well as so guaranteeing quality as 
to give him the maximum value for his money. 

* Delivered to the second National Conference on Marketing and 
Farm Credits in Chicago, April, 1914, in joint program with the West- 
ern Economic Society. 

32— F. F. C. 



498 MARKETING AND FARM CREDITS 

The consumer, especially in America, is much more able to 
turn effort into dollars than to turn dollars into satisfactions. 
Dr. Dole in his recent book, ' ' The Burden of Poverty, ' ' estimates 
that the poor at least waste one-tenth of their income by the se- 
lection and purchase of foolish things which do them no good. 
Higher up in the economic scale the waste is undoubtedly much 
greater, and surely the pure food problem is a part of the dis- 
tribution problem, for the product is stopped in transit to be 
packed or prepared and is frequently debased and even poisoned. 

A Competitor for Middleman 

No one expects to eliminate the useful service performed by 
the middleman, but that that service can be performed more 
efficiently and economically there is no doubt, and there is the 
further question whether the initiative and control of that func- 
tion should not be taken over by those most interested, namely, 
the producer and consumer. Have we not too easily assumed 
that the only incentive for the performance of this service is 
that of profit to the middle man ? It is not novel to assume that 
this service can be successfully performed without the incen- 
tive of middleman profit. Distribution is already carried on in 
this country under the initiative of the producer as, for instance, 
the shoe manufacturers, who conduct their own retail stores and 
various other producers who operate in similar ways. Whether 
this is more efficient than the present profit-to-middle-man meth- 
od we do not here discuss, but merely point out the possibility. 

Distribution is also successfully carried on with the initia- 
tive wholly in the hands of consumers, as illustrated by a turn- 
over of $600,000,000 per year by the English Avholesale stores. 
This distribution is initiated and managed wholly by the con- 
sumer, no profit maker whatever intervening between, for in- 
stance, the tea estates in Ceylon, the plantation in Austria or 
the factory in Manchester and the final consumer in the remot- 
est part of Great Britain. 

Based upon what is being done by producers in this country, 
for example, the California Fruit Growers' Exchange and the 
North Pacific Fruit Distributors as told in these meetings by 
Mr. H. C. Sampson, and various farmers' organizations in dif- 
ferent parts of the country, showing the successful management 
of the initial steps of distribution by the producer, and what I 
have just mentioned as being done jin England, which is also 
successfully performed in various other European countries and 



EMERSO'N V. HARRIS 499 

the promising attempts at consumer cooperation in this country, 
are not these facts sufficient to justify the conclusion that distri- 
bution should be taken over by the producer in his own interests 
and by the consumer in his own interests — each working in his 
own field? 

It is the consumer end of this problem to which I wish to in- 
vite your attention for the short time remaining at my disposal. 

Notwithstanding the large, and we believe unnecessary, ex- 
pense of distribution, the fact remains that the local dealer, 
especially in food products, makes on the average a small profit 
for long hours of hard work. This does not prove anything 
about the 'economy of the system which the local dealer reaps, 
in fact, it indicates the reverse, for competitors appear as rapidly 
as the last one assumes that he can make a bare living. In other 
words, local retailing is a function which behaves very much like 
natural monopolies in which competition does not cure, but 
rather aggravates the evils from which the consumer suffers. 

The Chances of Success 

But in view of the small profits made by the experienced 
dealer, how can a group of consumers who are wholly inexperi- 
enced hope to step in and perform the same function at a sav- 
ing ? Is it reasonable to expect that volunteer directors, elected 
by the cooperative society of consumers can succeed and help the 
consumer when the local dealer can only keep his head above 
water ? But this is exactly Avhat is being done by some millions 
of plain working people across the Atlantic. The situation, 
however, does emphasize the obstacles in the way of initiating 
cooperative buying, but the hope that this can be done to the 
great advantage of the consumers is based not only upon the fact 
that it is being done already, but upon the important further 
fact that the consumers' store has a simpler and easier task be- 
fore it than has the dealer for profit, provided the consumers co- 
operative society is fully aware of the important advantages to 
be gained by cooperation and is based on a membership of loyal 
cooperators. 

When I say that the cooperative society has a simpler task I 
mean that certain expensive things incident to private merchan- 
dizing can be eliminated from the work of the consumer-owned 
store. 

Under our present system of aggressive or pushing distribu- 
tion of products, there is expended for advertising, soliciting and 



500 MARKETING AND FARM CREDITS 

other sales promotion expedients more than 10 per cent of the 
retail price, much of which is unnecessary from the consumers' 
standpoint. In other words, if consumers volunteer to serve 
themselves and commit themselves to their society, it is not nec- 
essary to spend money advertising nor soliciting them. This 
great expense of bringing the customer to the store can practic- 
ally all be eliminated from the cooperatively managed store. 

The 2 billions or so spent in this country annually for adver- 
tising, persuasive salesmanship, etc., could be largely eliminated 
if distribution were in the hands of the consumer. This vast 
expenditure has undoubtedly been constructive and wise, up to 
this time, but from the consumers' standpoint is, as now con- 
ducted, wholly waste. 

When the pull of the consumers' need is substituted for the 
push of the profit-making distributor, publicity and sales meth- 
ods will be revolutionized. 

Then again, the ordinary dealer is subject to losses due to 
miscalculation as to supply. This, too, can be eliminated when 
consumers are disposed to act together dependably. The 
changed attitude of the store keeper would cause him to buy to 
serve the consumer, instead of buying to sell. He would give 
reasonable but not excessive service, cut out the solicitor and 
reduce the cost of delivery by one-half. 

These expenses, therefore, incident to push, risk and profit for 
which the consumer now pays dearly, could largely be eliminated 
by the substitution of the cooperative buying system which has 
proven so successful in European countries. 

What is Done at Montclair 

At Montclair 363 consumers are organized on the Rochdale 
plan. These consumers owning the store in shares of $10 to 
$200 each, having one vote only, capital receiving only simple 
interest and all gains divided among consumer members. 

But cooperation is only the frame work and will never be 
made successful without efficiency in store administration, and 
as indicated above, efficiency from the consumer's standpoint 
means something more and different from efficiency from the 
merchandizers standpoint, for the purpose of cooperative buying 
is to enable the consumer to get his supplies at the lowest cash 
wholesale cost, plus only the necessary expense of handling and 
bringing it to his kitchen. 



EMERSON T. HARRIS 501 

Buying and store efficiency must, therefore, be taken up in 
as thorough a fashion as these things are handled in the most 
up-to-date manufacturing plant. 

"A Bonus" Delivery System 

At Montclair we have made some progress in this direction. 
The most notable thing we have done is the bonus delivery sys- 
tem, which enables the store to give satisfactory service at about, 
one-half the cost of the usual practice in what is called "free 
delivery. ' ' The plan is simply to give our members at the end 
of each 3 months a delivery bonus or discount. This dis- 
count we placed at 5 per cent. The member who has carried 
all his goods home gets the whole 5 per cent in cash. Other 
members get the 5 per cent minus what it has cost the store to 
give each member delivery service. That is, if a member has a 
delivery bonus discount of $10 and the wagon has called at hi» 
house, say, 30 times, and it is found that each call of the wagon 
has cost the store 10 cents, then 30 times 10 cents or $3 is de- 
ducted from the $10 delivery bonus and the balance paid in cash, 
which in this case amounts to $7. It is not the purpose of this 
system to compel people to carry home their goods when it is 
inconvenient for them to do so, but to encourage care and fore- 
sight in so ordering as to necessitate the fewest calls of the 
wagon consistent with the convenience of the member. Thus the 
housewife has the incentive not furnished by the ordinary so- 
called free delivery to exercise the same care that she would if 
the delivery service were at her own expense, as, of course, it 
is in either case. This system, it will be noted, makes for equity 
as well as economy, for the poor woman around the corner does 
not pay, perhaps, 10 or 15 per cent on the price of her goods to- 
pay for the carelessness of the housewife who requires several 
deliveries a day. 

When consumers understand this principle and find that all 
can get reasonable service without any expense in excess of the 
usual free delivery and that those who exercise care reap the 
benefit therefrom both the equity and the economy of the plan 
commend it to the thoughtful. 

Then, of course, we sell wholly for cash, thus eliminating ex- 
penses and losses incident to the credit system. 



502 MARKETING AND FARM CREDITS 

Cutting Down the "Peak Load" 

Another thing the consumer-owned store can do is to consid- 
erably level down the service needs of the store so as to avoid 
wihat the electricians call the "peak load". To illustrate this, 
we found our force exceedingly busy on Saturdays. The sec- 
retary sent a circular requesting all members to place their or- 
ders Friday so far as possible, and immediately the Friday bus- 
iness was so increased that it substantially equalled that of Sat- 
urday, greatly facilitating the work and enabling us to close at 
the proper time Saturday evening. We are now asking our 
members to place orders for staples and heavy goods, so far as 
convenient, early in the week. This again will even up and 
save excessive clerk hire. Of course, meats and vegetables must 
be delivered Saturday, but many other articles can as well be 
ordered early in the week. 

We are also undertaking to make the store serve as a clearing 
house through which our membei's can order in quantity such 
things as apples, flour, potatoes, etc., having them delivered di- 
rect from the car and in this way a material saving is made to 
the consumer. 

We anticipate that the society may be able in some cases to get 
things direct from farmers through parcels post by ordering 
.through the store. 

The cooperative society need not feel wholly committed to 
the store system but is engaged in moving products from the 
producer to the consumer at the lowest possible cost and serv- 
:ing the consumer in every possible way. 

When the machinery for the final steps of distribution is 
owned by the consumers and managed by their hired represen- 
tative, a long step has been taken toward the complete solution 
of the pure food and correct measure problems. The manager of 
the consumer owned store has no incentive to illegitimately 
cheapen anything, for no one connected with the cooperative 
store makes any profit or has any interests to serve other than 
those of the consumer. 

A Real Step Forward 

Adam Smith has said that the only way to balance supply and 
demand and to arrive at the correct price is by haggling be- 
tween seller and buyer. Perhaps this is so, but when this hag- 
gling is carried on across the counter between the housewife and 



EMERSON V. HARRIS 503 

the storekeeper in individual bargaining, the housewife is at a 
great disadvantage and is engaged in an undignified and diffi- 
cult business. The housewife is comparatively uninformed and 
will seek in buying, by playing hide and seek with bargains, to 
beat the dealer at his own game. 

In cooperation there is a remedy, for the haggling is removed 
from tihe counter and is conducted by the manager in the pri- 
mary markets under conditions which nearer approach equality 
of terms on the part of the buyer and seller. 

The consumer, therefore, can rest assured that his interests, 
both regarding cost and quality, are served better than he him- 
self could serve them and his mind, or rather her mind, is set 
free to give attention to matters other than cost and honesty of 
quality and measure, and when the pull of the consumer's need 
has been substituted as an incentive for the push of the dealer's 
profit, peaches will not be fed to hogs in Connecticut and vege- 
tables rot on the ground on Long Island, while thousands with- 
in a hundred miles are in need of these things. 

Our real incentive in Montclair is that of laboratory work, 
helping to tunnel mountains between producer and consumer, 
to work out methods which will reduce the cost of necessities 
to the consumer by at least one-eighth and insure purity and full 
measure. We hope to do this not mainly for the advantage of 
our own members, or even our own community, but to prove 
that the great principles which have been so successfully carried 
out in the old world can be applied under metropolitan condi- 
tions in the new, and to help bring to pass that condition in 
which the joy of work will be increased by the certainty of turn- 
ing the wages of work into the maximum of that which will 
supply the needs of the worker. 



504 MARKETING AND FARM CREDITS 



REPORT OF THE COMMITTEE ON PERMA- 
NENT ORGANIZATION 

(Adopted by vote of delegates) 

I. Agricultural Organizations 

Your committee on permanent organization after careful 
consideration respectfully recomemnds to this Conference : 

That the chairman of the Conference appoint a committee of 
10 who shall meet as soon as practicable after the adjournment 
of the Conference and proceed at once to organize an American 
Agricultural Organization Society. 

Such committee should have power to create sub-committees 
to represent the various interests that from time to time will 
ally themselves with the Agricultural Organization Society. 

Such committee shall start a campaign to put the Agricul- 
tural Organization Society on a permanent financial basis, to 
seek representative membership from various societies, organ- 
izations, and in general to work out plans to put such society 
on a permanent democratic basis. 

Such society shall have for its purpose : 

(1) To examine into the methods of production and distri- 
bution of farm products with a view of evolving a system of 
greater economy and efficiency in handling and marketing the 
same. 

(2) To encourage and promote the cooperative organization 
of farmers and of those engaged in allied industries for mutual 
help in the distribution, storing, and marketing of produce ; for 
the economical transfer of agricultural produce from the pro- 
ducer to consumer, for, in short, the efficient organization of 
the business of agriculture. 

(3) To supply instructors and lecturers upon the subject of 
cooperation among farmers, auditing and accounting experts 
and legal advice in matters relating to organization. 

(4) To issue reports, pamphlets and instructions which will 
help in spreading knowledge of the best means of rural better- 
ment and organization. 

(5) To organize and cooperate with central bodies and local 
branches of societies or other associations, for the promotion 
of "better farming, better business, and better living." 

(6) To encourage and cooperate with educational institu- 
tions, departments, societies, educational centers, etc., in all 



OFFICIAL BUSINESS 505 

efforts to solve the questions of rural life, rural betterment and 
agricultural finance and marketing and distribution of produce 
and the special application of the facts and methods discovered 
to the conditions existing among the farmers of America and 
to the solution of the problem of increasing cost of living. 

(7) To investigate the land conditions and land tenure with 
a view to working out better, more equitable and fairer sys- 
tems of dealing with this problem so vital to the social and the 
economic well-being of the country. 

(8) To call from time to time such conferences or conven- 
tions as will carry out the above mentioned objects. 

II. A Permanent Open Forum 

Your general committee on organization and federation was 
charged with a duty by the delegates who attended the 1914 
conference with formulating a plan of permanent organization 
for the continuance of this conference as an open forum and 
for federating with it existing agencies brought into existence 
for purposes of open discussion of those subjects that have to 
do with the great agricultural problems of America. 

Your committee has been at work during the past 18 months, 
carefully canvassing the field and studying the complex prob- 
lems associated with agriculture, and it now begs leave to sub- 
mit to you a plan for the permanent organization of the con- 
ference. 

Your committee recommends that the National Conference 
of Marketing and Farm Credits be continued on its present 
basis as an open forum of discusion of the problems that sur- 
round the production, distribution and financing of the Amer- 
ican farm and the American farm products. Your committee 
recommends in this connection the following: 

That the control of the Conference be continued by the gen- 
eral chairman of this Conference appointing a central commit- 
tee of 20 men ; and that there sihall be associated with this general 
committee a state director from each state, who shall serve in 
an advisory capacity. 

Your committee recommends that these state directors be 
selected by the delegates from each state represented at this 
conference, and that the elections of said delegates be made 
by the state delegates present, and that the nominations be 
presented at one of the business sessions before adjournment. 

Your committee further recommends that the order of retir- 
ing the general committee be determined by the committee it- 



506 MARKETING AND FARM CREDITS 

self after it has been completed by the present permanent 
chairman, 

Frank L. McVey, Lon D. Sweet, 

Frank P. Holland, Herbert Quick, 

Henry Wallace,* E, P. Harris, 

John Lee Coulter, E. M. Tousley, 

Charles W. Holman, H. C. Sampson, 

M. R. Myers, Charles McCarthy, 

Charles S. Barrett, Clarence Poe, 

Gifford Pinchot, James C. Caldwell. 
L. D. H. Weld, 



REPORT OF THE COMMITTEE ON RESOLUTIONS 

(Adopted by vote of delegates.) 

In the preparation of resolutions, the committee has in mind 
the purposes of the call for the Conference. The many opin- 
ions held of problems pressing for solution have made it im- 
possible to include the content of all resolutions offered to the 
committee. This Conference, however, consisting of represen- 
tatives from 44 states, the District of Columbia, and from 
Canadian provinces, presents its views for public consideration 
under the head of marketing, conservation, rural credits and 
congratulations. 

I. Marketing op Crops 

The immediate needs in respect to better marketing are 
standardization and information, to the end that a trade clas- 
sification as to pack or grade may mean the same thing in one 
market as another and that farm products may be intelligently 
priced and distributed. 

a. Standardization. We believe that under the interstate 
commerce clause and the weights and measures clause of the 
federal constitution, Congress has ample powers to prescribe 
standard packs and grades of all farm products both in coun- 
try and city districts, and we recommend that the United 
States Department of Agriculture through such agencies as 
may be provided be authorized to evolve from the best business 
practices and to establish by such means as may be devised, 
standards of measure and quality for all merchantable farm 



* Deceased February 22, 1916. 



OFFICIAL BUSINESS 507 

products. We recommend that Congress immediately provide 
by law for federal inspection of commodities of large volume, 
such as grain, hay and cotton, whereas such inspection is now 
conducted under state law or under rules of commercial bodies, 
to the end that by such future inspection all the classifying and 
grading of articles of interstate or foreign commerce may be 
made uniform. 

b. Information. Accepting as we do the trade law of sup- 
ply and demand as universal and inexorable, the Conference 
approves the employment of governmental agencies in the col- 
lection of seasonable information reflecting the acreage, condi- 
tion and output of farm products; and we urge greater effort 
and, if need be, more generous expenditures in order that such 
reports and estimates may be more accurate. But we insist 
that equal energy be employed by the governmental agencies 
in collecting and disseminating corresponding seasonable in- 
formation covering the manufacturing, commercial and other 
trade conditions which reflect the rate of consumption of each 
given farm product. 

We recommend that the bureaii of foreign and domestic com- 
merce and the office of markets be provided with the necessary 
means and be required to cooperate in the collection and dis- 
semination of information which will enable the producer fairly 
to price and wisely to distribute his products. We recommend 
that this information be furnished while the farmer has pro- 
duce to sell and not after he has sold it to organized traders 
and speculators who under present conditions are enabled to 
prosper unduly at the expense of the farmer. 

c. State Market Commissions. In view of the fact that mar- 
ket commissions are rendering valuable service to producers 
and consumers in broadening markets, in aiding the producer 
to secure a compensatory price for such products, and the work 
of such marketing commissions can be greatly aided and pro- 
ducer and consumer still further benefited by increasing the 
number of such state marketing commissions, the National Con- 
ference on Marketing and Farm Credits hereby strongly urges 
the states in the union, which have not yet created a marketing 
commission, to do so at the earliest time in the interest of their 
own producers and consumers as well as in the common interest. 

d. Terminal Markets. We recognize that the practices 
common in many of our terminal markets have caused a great 
deal of dissatisfaction among producers, and a consequent shat- 



508 MARKETING AND FARM CREDITS 

tering of coafidence even in the worthy agencies of distribu- 
tion. The National Conference on Marketing and Farm 
Credits, therefore, places itself on record as favoring federal 
legislation for interstate shipments, which will require commis- 
sion merchants and any other receivers of farm products on 
consignment, to keep a uniform system of accounts giving each 
shipment a number in rotation, showing date and from, whom 
received, date of sale, name of purchaser and price ; to forward 
a transcript of the entry promptly to shipper; and to keep all 
such records open at all times for examination by the shipper, or 
any state or federal official. 

In our opinion, the proper administration of this legislation 
can only be accomplished by stationing federal inspectors at 
all the large terminal markets. 

II. Rural Credits 

a. Aid and Direction in Reclamation. Conditions have 
arisen in certain sections of the United States in recent years 
that are retarding rural development and making it more and 
more difficult for farmers of small capital to become owners of 
the land they cultivate. These conditions include higher prices 
for land in private ownership, higher cost of irrigation, higher 
cost of living, higher wages and larger outlay to improve and 
equip farmers. The influence of such conditions is shown in 
the falling off in land settlement in certain sections of the coun- 
try and in the increasing number of failures among these set- 
tlers. It is shown in the other sections of the country by the 
decreasing number of farms cultivated by their owners and 
by the colonizing of rural districts with people who are able 
to pay higher rent because they will accept a debased standard 
of living. 

We believe that the remedy for these conditions existing in 
the irrigation sections is to be found in legislation by the states, 
or by the nation and the states, which will provide money to 
be loaned settlers to aid in the preparation of public land for 
cultivation and for the purchase of such privately owned land 
to be resold to settlers under methods and conditions similar to 
those now in successful operation in Ireland, Australia, New 
Zealand and other countries. 

As such legislation would involve a radical departure from 
past methods and policies and as the systems of other countries 



OFFICIAL BUSINESS 509 

would have to be modified to conforai to our needs and condi- 
tions, the first step toward the inauguration of such legislation 
should be comprehensive investigation of the subject. 

This Conference, therefore, favors and recommends to Con- 
gress the appointment of a commission of 5 members to inves- 
tigate the methods and results of land settlement in certain 
sections of this country where settlement of cut-over lands, 
drainage of swamps lands and irrigation must be undertaken; 
and also the causes and results of tenant farming in the entire 
country; and to prepare a report with recommendations as to 
measures needed to remove the obstacles to acquiring farms and 
the modifications needed in the successful land settlement sys- 
tems of other countries to ensure their effective operation here. 

b. For Banking Facilities. There are 118 bills or more for 
rural credit systems before Congress at the present time. 
Many of these bills contain wise provisions that should be 
enacted in the laws of this country. We are confident that 
with the undoubted sentiment for credit better credit facilities 
expressed in no uncertain tone by the farmers of this country, 
Congress will enact at this session some legislation along the 
line of rural credit. But this Conference goes on record as en- 
dorsing only such legislation as will provide for the soundest 
valuation and the most careful maintenance of true educational 
values, and only such legislation as is based upon self-help, 
careful auditing, a sound amortization plan, and the coopera- 
tive principle of organization for rural credit banks. 

Such a rural credit system should be created to aid : 

1. Tenants who are in need of working capital and who are 
willing to form approved cooperative organizations under 
which moderate credit may be safely extended; 

2. Tenants, who have reached a financial condition which 
makes the purchase of land a safe risk but who require larger 
loans and longer time than they can secure under the existing 
commercial credit conditions ; 

3. Land owners who desire to add permanent improvements 
without impairment of working capital. 

We oppose any legislation that suggests the wholesale dis- 
tribution of government funds or the loaning of government 
credit, in such a way as to encourage land speculation, or land 
investments which the business experience of our people has 
shown to be hazardous. 

This Conference, therefore, strongly endorses a practicable 
plan for rural credit. It just as strongly protests against any 



510 MARKETING AND FARM CREDITS 

plan that will end mainly in real estate speculation and in- 
crease in land values to the disadvantage of actual settlers. 

Any plan adopted for aiding settlers by a better system of 
rural credit should be preceded by an effective plan for pre- 
venting the increase of land values that otherwise is certain to 
deprive the settler of intended aid. This is done in Ireland 
and elsewhere by fixing in advance the prices at which land 
shall be sold by owners. It is done in Victoria, Australia, and 
elsewhere by government purchase and resale to settlers. It 
might perhaps be done by an unearned increment tax on bene- 
fited lands. Whatever method may be adopted on investiga- 
tion, we consider that this object of preventing speculation and 
providing that the actual settler rather than the speculator, or 
so-called ''investor" shall have the full advantage of improved 
credit, is the most needed preliminary step in a program of 
rural credit, reclamation and land settlement. 

We recommend that this Conference be represented at Wash- 
ington this coming session of Congress, in the presentation of 
this phase of rural credits to the proper committee. 

III. Accommodations and SER^^CE 

The Third National Conference on Marketing and Farm Cred- 
its here have enjoyed the hospitality and excellent service of 
the Hotel Sherman, and extends thanks for the many favors 
extended by the management. 

To the officers and committee on organization this Conference 
extends thanks and congratulations upon the great success of 
this Conference. And in this connection the Conference recog- 
nizes the high grade of service of the secretary, Charles W. Hol- 
man, and his assistants, in bringing the Conference to a success- 
ful conclusion. 

In the opinion of your committee the chairman of the Con- 
ference should be instructed to send a telegram of good wishes 
to the sponsor of the First Conference, Hon. F. P. Holland of 
Dallas, Texas. 1 

H. W. Danforth, Chairman. 
Charles McCarthy. 
Elwood Mk^vD. 
Clarence Ousley. 
H. W. Tinkham. 

Frank L. McVey, (Ex-officio.) 
Charles W. Holman, (Ex-officio.) 



OFFICIAL BUSINESS 511 



WORK OF 1914 SESSIONS 

At the Second National Conference on Marketing and Farm 
Credits, held in Chicago, April 14-17, the delegates passed, by 
unanimous vote, the following report of the Committee on 
Permanent Organization : 

After a survey of the problems, both local and national, 
your committee recommends : 

(1) That the work of this body should be perpetuated un- 
der the name of the National Conference on Marketing and 
Farm Credits. 

(2) That the chairman of the business sessions be instructed 
to appoint a general committee of not less than fifteen mem- 
bers whose personnel shall be of a representative character. 

This committee should have powers : 

(1) To increase its membership according to the needs of 
the work to be done. 

(2) To create such subcommittees to represent the various 
interests that from time to time will ally themselves with the 
National Conference on Marketing and Farm Credits. 

(3) To work out a scheme of membership representation 
among the various societies, organizations, institutions and 
individuals that are admitted to membership, and a suitable 
membership fee for each of the parties here referred to. 

(4) To begin a constructive educational program for the 
improvement of the standards of farm products and for the 
assisting of farm producers to perfect the necessary organi- 
zations for the carrying out of this plan in the most business- 
like way that is possible for each organization. 

(5) To look into the feasibility of holding an all- American 
standardization exhibit at the time of the third conference, 
and to be given the power to act. 

(6) To determine the time and place of the Third National 
Conference on Marketing and Farm Credits. 

The authority granted this general committee and its sub- 
committees should expire at the end of the Third National 
Conference on Marketing and Farm Credits. 
Respectfully submitted, 

Frank L. McVey 
B. F. Harris 
Charles McCarthy 
John Graham Brooks 
Lou D. Sweet 
J. C. Caldwell 
Charles W. Holman. 



512 ]MARKETING AND FARM CREDITS 



Report of Resolutions Committee 

In addition the delegates passed, with only two dissenting 
votes, the following report of the committee on resolutions: 

"Your Committee on Resolutions respectfully submits the 
following : 

(1) Whereas, The Sherman Act as it is now construed i^ 
a serious menace to progress of organization and confedera- 
tion; and, 

Whereas, The farmers and the other cooperative organi- 
zations do not wish to be lawbreakers, neither do they wish 
for special exemptions of any kind; and, 

Whereas, They wish legislation which will not hinder or 
forbid such legitimate organizations and which will prevent 
unfair practices by all organizations as well as protect such 
organizations from unfair discrimination and practices di- 
rected by great or small combinations or dealers. 

Therefore he it resolved, That this Conference hereby demands 
from Congress legislation which will properly modify the exist- 
ing Sherman law to the end that this proper and reasonable pro- 
tection and regulation be extended to cooperative organizations, 
whether they be of consumers or producers, and to the end that 
such organization be fully protected and encouraged thereby. 

(2) Resolved, That it is the judgment of the Conference 
that Congress should appropriate liberally for the mainte- 
nance of the office of markets, and further that the said office 
of markets should employ at the earliest possible time, special- 
ists charged with the duty of ascertaining all facts pertaining 
to the marketing of all farm products, particularly perishable 
products, having in mind an early plan for the proper prepara- 
tion for market, shipping, inspection and selling of the said 
products, and that as early as practicable special attention be 
given to the investigation of the feasibility of placing federal 
inspectors of perishable products in the principal markets and 
transportation centers also that this office be urged to cooper- 
ate with the various state departments of agriculture. 

(3) Resolved, That we urge all farmers and other coopera- 
tive organizations to join us by sending delegates on a proper 
representation basis as determined by our permanent com- 
mittee, to our next conference in order that all cooperators will 
eventually be joined in some kind of a national permanent 
federation. 



OFFICIAL BUSINESS 



513 



(4) Resolved, That this conference hereby requests all 
transportation bodies to extend the work now done for greater 
production to an equal effort toward standardization and mar- 
keting, and that these transportation agencies be invited to 
cooperate with all future efforts of this conference in this di- 
rection ; we hereby urge such agencies to federate their efforts 
and organize de.iinitely for this purpose. 

(5) Resolved, That the question of holding the Conference 
at the San Francisco Exposition be referred to the committee 
on permanent organization which has already been charged 
with the duty of passing upon the time and place of the next 
meeting. 

(6) Whereas, The United States Commission on Industrial 
relations has indicated the intention of looking into the farm 
labor problem ; 

Therefore he it resolved, That this Conference urge tihat the 
said commission make an exhaustive investigation of both farm 
labor and farm tenancy problems, particularly in their relation 
to the more business-like production and distribution of farm 
products. 

(7) Whereas, The educational institutions of the various 
states of the United States States have during the past decades 
given most of their attention to the problems of production 
insofar as they have interested themselves in agriculture ; and, 

Whereas, The problems of marketing and farm credits have 
now come forward as questions of great national importance, 
causing great public concern; 

Therefore he it resolved, That the Second National Confer- 
ence on Marketing and Farm Credits urges upon the afore- 
said educational institutions the desirability of giving these 
subjects a place in their courses of study and be it further 
resolved that we urge legislative bodies to liberally support 
the effort to establish this new work by reasonable appropria- 
tions of the public funds. 

(8) Be it resolved, And it is the sense of this body, that the 
campaign for the standardization of packs, packages, carriers, 
etc., should be immediately taken up and the various interests 
employed in promoting this work be solicited to cooperate in 
forwarding this work and in forwarding an ail-American 
standardization exhibit, 

(9) Resolved, That this Conference urge upon Congress ac- 
tion upon the question of rural credit; this action should be 

33— M. F. c. 



514 MARKETING AND FARM CREDITS 

taken, however, with care and deliberation. Great interests 
which have already controlled the marketing of industrial se- 
curities are now striving to gain control over rural credit. 
Again we recognize that any system of bonding on a long time 
basis must be based on the soundest valuation and maintenance 
of agricultural values. Any hasty or wild-cat exploitation 
will only hurt in the end ever^^ effort to promote an efficient 
system of agricultural credit. Amortization schemes must be 
carefully tested in order that they do not prove detrimental to 
true cooperation, which is only successful the world over when 
based upon self-help, careful auditing, valuation and sound 
business methods; we favor the basic cooperative principles in 
dealing with the question of farm credit, as well as in all other 
matters of farm organization. 

(10) Resolved, That we heartily endorse the passage by 
several legislatures of true cooperative laws based upon the 
one man, one vote basis, and urge upon the members of this 
Congress the necessity of promoting such laws in every state 
of the union. 

We hereby endorse the cooperative plan of marketing goods 
and urge upon our legislatures proper legislation for the en- 
couragement of such organizations, the protection of them 
against unfair discrimination and upon the business of pro- 
ducers, and also such survey of state markets and market con- 
ditions, and the furnishing of such information by marketing 
commissions or otherwise, as will adequately help in the work 
of such true cooperative organizations. 

Whereas, The national government and the various state 
governments now expend large sums for the collection and 
diffusion of information showing the quantities of farm pro- 
ducts raised by American farmers, i. e., to the question of sup- 
ply, but have given little attention to the question of location 
and extent of demand. 

Therefore le it resolved, That the Conference urges the de- 
sirability of the collection and diffusion of similar information 
showing the demand for these products both in this country 

and abroad. 

J. C. Caldwell, Chairman, 

Charles McCarthy 

JouN Lee Coulter 

John Graham Brooks 

A. W. Sanborn. 



ACCREDITED DELEGATES 1915 CONFERENCE 

Alabama 

McLane Tilton, Jr., Pell City; banker, secretary, Alabama 
Bankers' Association. 

Max Bleiberg, Cullman ; farmer. 

Emmet A. Jones, State Capitol, Montgomery ; chief of Markets 
Bureau, representing the State of Alabama. 

Arkansas 

W, S. Goodwin, Warren; lawyer, and member of Congress,. 
Seventh District of Arkansas. 

J. "W. Stroud, Rogers; farmer and fruit grower, secretary, 
Ozark Fruit Growers' Association. 

California 

Elwood Mead, State University, Berkeley ; professor of Rural 
Institutions, member of state rural credits commission. 

Harris Weinstock, 525 Market St., San Francisco ; California 
state market director, California state rural credits commission., 

Canada 

G. G. White, 1079 McMillan, Winnipeg; lecturer, Manitoba 
Agricultural College. 

R. M. KiNziE, Winnipeg; farmer, Manitoba Grain Growers' 
Association. 

W. J. Black, 22 Victoria St., Ottawa Economic and Develop- 
ment Commission. 

G. F. Chipman, Winnipeg, Manitoba; editor. Grain Growers' 
Guide. 

George Popper, Toronto, Ontario. 

H, S. Arkell, Department of Livestock, Ottawa, Ontario. 

F. C. Hart, Parliament Buildings, Toronto ; Department of Ag- 
riculture. 

J. H. Hare, 2 St. Clair Ave., Toronto; livestock branch, De- 
partment of Agriculture. 



516 MARKETING AND FARM CREDITS 

James W. McG-uyor, 12tli St., Brandon, Manitoba; farmer. 

J. W. Rutherford, Department of Natural Resources, Cana- 
dian Pacific Railway, Calgary, Allwita; superintendent of agri- 
culture, Canadian Pacific Railway. 

V. Winkler, Manitoba ; minister of agriculture of Manitoba. 

W. E. CoLBORNE, 812 Sommerset St., Ottawa, Ontario ; farmer, 

Colorado 

Russell H. Forbes, 804 First National Bank Building, Den- 
ver; newspaperman; Colorado Fruit Growers' Auxiliary Com- 
mittee. 

Frank N. Briggs, Cor. IStb & Stout Sts., Denver; president 
Interstate Trust Company, representing state of Colorado. 

W. M. Lampton, 221 Equity Bldg., Denver; general freight 
agen,t D. & R. C Ry. ; representing the State of Colorado. 

Charles L. Hover, Longmont ; farmer, representing the State 
of Colorado. 

Lou D. Sweet, 516 Equity Bldg., Denver; farmer, Colorado 
and National Potato Associations. 

Delaware 
H. Hayward, Newark ; dean and director Department of Agri- 
culture, Delaware College. 

District of Columbia 

Carl Schurz Vrooman, "Washington; farmer, assistant secre- 
tary United States Department of Agriculture. 

Paul H. Moncure, Washington ; United States Bureau of La- 
bor Statistics. 

J. W. T. Duval, United States Department of Agriculture, 
Washington. 

C. W. Thompson, United States Department of Agriculture, 
Washington ; Office of Markets and Rural Organization. 

Grosvenor Dawe, 3203 19th St. N. W., Washington; editor 
and speaker. 

George P. Hampton, 36 Bliss Bldg., Washington; editor, 
Farmers' Open Forum, The National Marketing Association. 

Florida 

L. C. Williman, Tampa^ 

C. O. Holmes, Bristol; cooperataoai and colonization, repre- 
senting' the State of Florida 



ACCREDITED DELEGATES 1915 CONFERENCE 517 

Georgia 

F. J. Mebriam, 116 East Hunter, Atlanta; publisher, South- 
western Ruralist. 

Dan G. Hughes, Capitol, Atlanta; assistant commissioner of 
agriculture. Southern Conference for Education and Industry. 

Idaho r 

N. A. Jacobson ; fruit grower, representing the State of Idaho. 
HoNORE Tamming; reporter. 
Gr. R. HiTT, Boise ; State Banking Department. 
W. G. ScHOLTZ, Boise; state director of farm markets, repre- 
senting the State of Idaho. 

T. A. Mauritzen, Bliss; farmer, Bliss Farmers' Grange. 

Illinois 

E. B. Kilmer, 1001 Schiller Bldg., Chicago; salesman, the 
Pfauder Company. 

E. M. Schalck, 1722 N. Mozart St., Chicago; assistant to state 
entomologist, representing the State of Illinois. 

Percy L. Perry, 145 S. D. Hall, University of Chicago, Chi- 
cago; student. 

Albion W. Small, University of Chicago, Chicago ; professor 
of sociology. 

Will A. Butterfl, Jr., 5729 Cornell Ave., Chicago; publish- 
ing, representing Mt. Vernon College, Ohio. 

E. A. Heald, Canton; vice-president, Canton National Bank. 
Christian Gross, 6107 Kenwood Ave., Chicago. 

F. A. Pearson, Urbana ; instructor in Illinois Agricultural Col- 
lege, University of Illinois. 

A. M. Ten Eyck, 111 S. Main St., Eockford; county agricul- 
tural agent, "Winnebago County. 

S. A. Mason, Bloomington ; Illinois Farmers ' Institute. 

Albert E. Guge, 1102-15 E. Washington St., Chicago ; organ- 
izer, secretary-treasurer, Social Service Association. 

Ealph Allen, Delevan; farmer, Illinois Farmers' Institute. 

A. Suhring, Peoria; manager. Farm Loan department, Dime 
Savings & Trust Co. 

G. G. Happing, Havana ; farmer. 

John Western, 717 Oakton, Evanston ; fruit grower. 
S. Liph, 1258 Taylor St., Chicago ; teacher. 



518 MARKETING AND FARM CREDITS 

William Geweke, Des Plaines ; fruit gardener, Fruit Garden 
ers' and Farmers ' Association of Cook County, Illinois, 

J. C. Jones, Ridge Farm; farmer. Ridge Farm Farmers' Ele- 
vator Company. 

Richard Pride, Chicago ; editor, American Elevator and Grain 
Trade. 

Charles N. Haskins, 3032 Ellis (Groveland) Ave., Chicago; 
lecturer, publisher, salesman, organizer and teacher. The Service 
Union and The Joy Service. 

Eli Beers, 4147 Langley Ave., Chicago. 

F. W. BousKA, 2037 Continental Commercial Bldg., Chicago ; 
expert in buttermaking, American Association of Butter Manu- 
facturers. 

0. B. Thompson, 4800 No. Lawndale Ave., Chicago. 

D. T. Richie, 1437 Higihland Ave., Chicago. 

B. B. Herbert, 4620 Ravenswood Ave., Chicago; editor and 
publisher, National Government, representing Lincoln Memorial 
University of Cumberland Gap, Tennessee. 

R. "W. Leatherbee, Green Bay Road, Lake Forest ; farmer. 

Edward K. Slater, 700 So. Clinton St., Chicago; with Blue 
Valley Creamery Company, National Dairy Council. 

Millard R. Myers, 230 So. La Salle St., Chicago ; editor, Amer- 
ican Cooperative Journal. 

Roymayne Armstrong, 178 North Taylor Ave., Oak Park; 
stenographer. 

Myrtle Rogers-Myers, 178 N. Taylor Ave., Oak Park. 

C. A. Warner, 20 W. Washington, Chicago ; chief industrial 
agent, Adams Express Company. 

L. T. Jonas, 104 B. Broadway, Centralia; lawyer and grain 
dealer, L. H. Jonas & Company. 

Henry A. Goetz, 830 Oakdale Ave., or 714 McCormick Blvd., 
Chicago. 

Fred H. Rankin, College of Agriculture, Urbana; professor, 
University of Illinois. 

Edward A. Brown, 72 West Adams St., comptroller of Chi- 
cago Elevated Railway ; New York University, New York City. 

H. A. Dooley, Des Plaines; Agricultural Department of St. 
Mary's Teachers' School. 

Richard E. Moss, 7334 Yale Ave., Chicago ; farmer, La Salle 
Extension University. 

George W. Simon, 706 W. 12th St., Chicago ; western agent, 
The Jewish Agricultural and Industrial Aid Society, and The 
Federation of Jewish Farmers of America. 



ACCREDITED DELEGATES 1915 CONFERENCE 519 

L. P. Bacon, 1115 Railway Exchange, Chicago ; assistant gen- 
eral colonization agent, The Atchison, Topeka & Santa Fe Ry. 

W. J. Carmichael, 906 So. Goodwin, Urbana; instructor and 
investigator in Animal Husbandry, University of Illinois. 

Ella R. Meissier, 3843 W. Adams St., Chicago. 

H. E. Monroe, 415 Villa St., Elgin. 

F. L. Petty, 1522 Michigan Boulevard Bldg., Chicago ; editor. 
Farm and Home. 

E. LovEJOY, 4130 Calumet Ave., Chicago ; railway mail service. 
T. R. Hawks, 6442 Cottage Grove Ave., Chicago ; printer, T. R. 

Hawks Company. 

W. R. Blackwelder, Chicago ; state home visitor for children. 

S. C. Vandenburg, 910 Gait Ave., Chicago. 

James A. King, 3135 Wilson Ave., Chicago ; managing editor, 
The Farming Business, W. D. Boyce Company. 

Miss F. Aparetta Voorhees, 2040 Sherman Ave., Evanston; 
accounting. 

MiNONA S. Jones, 3532 Ellis Ave., Chicago ; writer, speaker, 
and organizer for "votes", The Tomahawks. 

P. R. Robinson, 5714 Blackstone, Chicago. 

George F. Fullvik, Rockford; farmer, Winnebago County. 

F. I. Mann, Chicago; farmer, Illinois Farmers' Institute. 
J. B. Lawson, 547 W. Jackson Blvd., Chicago. 

John E. Barrett, Prairie View; farmer, Lake County Farm 
Implement Association. 

DwiGHT Sanderson, 1109 E. 54 Place, Chicago. 

William Dighton, 712 N. Stole, Montieello; banker and 
farmer. 

Marion Gallup, 510 East Water, Pontiac; retired farmer, 
The Farmers' Grain Dealers' Association. 

B. P. Harris, Champaign ; farmer and banker. 

L. L. Lower, Campus; farmer, Gleaners' Association. 

A. C. Rice, Jacksonville ; farmer and banker, president Grain 
Dealers' Association of Illinois. 

J, A. Henebry, Plainfield ; Plainfield Grain Company. 

William M. Stickney, 52-54 Board of Trade, Chicago ; grain 
commisiisoner, Lowell Hoit & Company. 

William H. Bush, 1538 N. State St., Chicago. 

E. J. DowiE, La Salle Station, Chicago; special agent of traffic 
department, New York Central Line. 

Charles R. Longfelder, Mt. Vernon; livestock and grain, 
Longfelder Brothers. 



520 MARKETING AND FARM CREDITS 

John C. Clair, Chicago; industrial and immigration commis- 
sioner, Illinois Central Railroad. 

Eugene F. McPike, 1200 Michigan Ave., Chicago; secretary, 
American Railway Perishable Freight Association. 

Arthur E. Swanson, Chicago ; instructor, Northwestern Uni- 
versity. 

F. H. Newell, 1109 California St., Urbana; civil engineer, 
University of Illinois. 

Emil Keller, Fairburg; Strawn Farmers' Elevator Company. 

W. C. Farlon, Augusta ; farmer and stockman. 

Charles E. Bentlet, Michigan Boulevard Bldg., Chicago; 
farmer. 

H. E. Young, 5812 W. Circle Ave., Chicago ; farmer. 

James Atkinson; editor. Homestead. 

W. T. CORNELISON, Peoria; grain dealer. 

"W. E. Lagerquist, 31 W. Lake St., Chicago ; professor of eco- 
nomics, Northwestern University. 

Graham Taylor, Chicago; minister and social worker, The 
Survey. 

Charles E. Reed, 17 Chalmers Place, Chicago ; social worker. 

J. Ralph Pickell, 327 S. La Salle St., Chicago; editor. Price 
Current Grain Reporter. 

Charles L. Stewart, ^09 Commerce Bldg., Urbana; instruc- 
tor, University of Illinois. 

Frank M. Chase, care Prairie Farmer, Chicago ; assistant edi- 
tor, Prairie Farmer. 

Franklin M. Perry, 6239 Kimbark, Chicago ; merchant. 

William W. Clery, 226 S. La Salle St., Chicago ; architect. 

W. F. Bennett, 192 Clark St., Chicago; business manager, 
National Poultry, Butter and Egg Association. 

Herman W. Danforth, Washington; farmer. National Coun- 
cil of Farmers' Cooperative Association. 

Charles Larson, 1741 N. Kimball Ave., Chicago. 

Thomas S. Hiles, 746 No. Parkside Ave., Chicago ; merchant. 

J. H. Finland, Marquette Bldg., Chicago; investment. 

B. W. McCullough, 76 W. Monroe St., Chicago; secretary, 
National Implement & Vehicle Association. 

Richard L. Crampton, 208 S. LaSalle St., Chicago ; secretary, 
Illinois Bankers' Association. 

P. C. Allen, Ransom; manager of the Farmers' Elevator Com- 
pany. 



ACCREDITED DELEGATES 1915 CONFERENCE 521 

L. W. Armstrong, 10 So. La Salle St., Chiicago; representing 
Convention Bureau, Chicago Association of Commerce. 

Charles E. Snyder, Chicago ; editor, The Farmers ' Review. 

F. H. HiGGiNS, 500 North Dearborn St., Chicago; editor, The 
Farming Business. 

Roger Patterson, Durand; farmer, 

H. W. Hanson, 112 W. Adams St., Chicago; secretary-treas- 
urer. Farm Mortgage Bankers' Association of America. 

J. D. Larson, 234 Albert Ave., Roekford. 

W. F. Handschin, 702 S. Elm St., Champaign ; on staff of ag- 
ricultural college, University of Wisconsin. 

George N. Coffey, Urbana ; assistant state leader for county 
advisors. 

A. R. Mann, Ithaca, New York ; teacher, New York State Col- 
lege of Agriculture. 

August Geweke, Des Plaines ; truck gardener. 

J. D, Jarvis, 4025 N. Kevdale Ave., Irving Park; advisory 
expert, department of dairy and creamery implements, The De 
Laval Separator Company. 

J. T. Graves, 5707 Blackstone Ave., Chicago, 

Jesse L. Ruble, 221 East Ontario, Chicago, 

Herbert W. Mumfore, Urbana ; chief of Livestock Illinois Ex- 
periment Station, Agricultural College of University of Illinois. 

Charles E. Eckerle, 120 Humphrey Ave., Oak Park ; general 
organizer of farmers' cooperative companies, American Coopera- 
tive Journal, 

H, B, Reid, 1010 Advertising Bldg., Chicago, assistant editor 
and advertising manager, The Shepherds' Journal, 

Lewis L. Holladay, 109 N. Dearborn St., Chicago; consulting 
engineer. 

Joseph A. 'Donnell, 154 W, Randolph St., Chicago ; attor- 
ney at law, farmers in Michigan (Benton Harbor). 

Otokar L. Prohaska, 1053 Milwaukee Ave,, Chicago ; chemist. 

H. E. HoRTON, Chicago ; Agnieultural Commissioner, American 
Steel and Wire Co, 

Indiana 

Edward L, Tanner, Plymouth ; Edgerton Manufacturing Com- 
pany. 

William A. Barrower, Oakland ; farmer, Livestock Shipping 
Association, 

George Weymouth, Spencer ; editor, Farm Life, 

D. L, Mabbett, Colfax; farmer and feeder, representing the 
State of Indiana. 

Lewis McNutt, Brazil, R. R. No. 2 ; farmer. 



522 MARKETING AND FARM CREDITS 

William O'Keefe, Plymouth; farmer, representing the 13th 
Congressional District of Indiana. 

A. A. Gast, Akron ; farmer. 

Horace G. Miles, Danville ; farmer. 

H. L. Keed, R. R. No. 6, Logansport ; farmer. 

Sam B. Woods, Crown Point ; farmer, 

Charles N. Williams, 150 East Market St., Indianapolis; 
president, Farmers' Trust Company. 

C. A. Dunkelberg, 2401 Fairfield Ave., Fort Wayne ; manu- 
facturer and farmer. 

T. L. Wheeler, Huntington; editor. The Farmers' Guide. 

Iowa 

R. A. Pearson, Ames ; president of Iowa State CoUege. 

Ira p. McVicker, Eagle Grove; farmer. Grain Dealers' Co- 
operative Association. 

W. J. Ray, Colorado; secretary of Farmers' Grain Dealers' 
Association of Iowa. 

John U. Surface, Mason City; farmer, Farmers' Grain Deal- 
ers' Association. 

I. N. Baughman, Marseilles ; agricultural manager. 

Alson Secor, Des Moines ; editor. Successful Farming. 

E. L. Johnson, Waterloo; banker, Leavitt & Johnson Trust 
Company. 

H. J. Hinbregtre, Hull; manager. Farmers' Cooperative As- 
sociation. 

Frank A. Cooley, Fort Dodge; grain commissioner, Lowell 
Hoit & Company. 

A. B. HoLBERT, Greeley ; horse importer and breeder, farmer. 

Dan G. Stites, Fort Dodge ; banker, Webster County Trust & 
Savings Bank. 

E. T. Meredith, Des Moines; publisher. Successful Farming. 

NoRRis A. Brisco, Iowa State University, Iowa City ; professor 
of economics, and head of Department of Economics, Commerce 
and Sociology. 

D. P. HoGAN, Massena ; banker, representing the State of Iowa, 
and also the Rural Credit League. 

S. J. CocKLiN, Washington ; loans and real estate. 

Orville Lee, Sac City ; representing 60th District of Iowa. 

W, H. Arney, Marshalltown ; banker and farmer. 

J. F. EiSLE, Malcom ; farmer. 

Charles Shade, Rock Rapids ; First National Bank. 

A. J. Cole ; physician, representing 10th District of Iowa. 



ACCREDITED DELEGATES 1915 OONPERENCE 523 

Kansas 

W. C. Landson, Salina ; editor, National Field, Salina Union, 
Kansas Division Farmers ' Union. 

G. D. EsTES, Stafford; grain and stock, Farmers' Grain Deal- 
ers' Association of Kansas. 

Chester A. Leinbach, Orange ; farmer, representing the State 
of Kansas. 

G. "W. Lawrence, 903 State St., Larned; secretary, Farmers' 
Cooperative Grain Dealers' Association. 

E. J. LiNscoTT, Holton; farmer and banker, representing the 
State of Kansas. 

A. H. Plumb, Emporia ; president. Mutual Banking and Loan 
Association. 

Clyde W. Miller, Miller; farming and stock raising, Kansas 
State LivestO'ck Association. 

C. D, Resler, Chanute; farmer. 

W. R. Webb, Bendena; farming and stock raising, represent- 
ing Governor Arthur Capper of Kansas. 

J. C. Bergner, Pratt ; farmer, representing the State of Kansas, 
governor appointee. 

P. H. MuHAN, Tampa ; banker, representing the State of Kan- 
sas. 

Mrs. W. R. Webb, Bendena ; farming and stock raising. 

George E. Putnam, 1502 Massachusetts, Lawrence ; instructor 
in economics. University of Kansas. 

George C. Tredick, Kingman ; breeding Holsteins. 

M. M. Jardine, Kansas Experiment Station, Manhattan ; dean 
of agriculture, and director of Kansas Experiment Station, Kan- 
sas Agricultural College. 

L. W. Moody, Emporia ; Kansas Rural Credit Association. 

Charles Dillon, Topeka; managing editor. Capper Farm 
Papers. 

Kentucky 

F. F. Gilmore, 41 Main St., Louisville ; publisher, Kentucky 
farming. 

Erbie Lee Harrison, State University, 287 S. Lime St., Lex- 
ington; president. Farmers' Union, Kentucky Division. 

J. W. Newman, State Capitol, Frankfort ; commissioner of ag- 
riculture. 



524 MARKETING AND FARM CREDITS 

Michigan 

James N. MIcBride, E. Lansing; farmer, Michigan State Mar- 
ket Director. 

R. G. HoopiNGARNER, Crystal Falls ; county agriculturist, Iron 
County. 

N. W. Stuart, Clarksville ; farmer, representing the State of 
Michigan. 

A. B. Graham, Adrian ; general farming, representing Michi- 
gan. 

"W. A. Hedrick, East Lansing ; teacher. 

C. J. Monroe, South Huron ; farming and banking, State Hor- 
ticultural Society of Michigan. 

"W. E. Sheldon, Letehfield ; manager of creamery, representing 
Michigan. 

John I. Gibson, 447 Wealthy, Grand Rapids ; secretary, "West- 
ern Michigan Development Bureau; representing Michigan. 

Eban Mumpord, 408 Genesee, Lansing ; state leader of county 
agricultural agent work, Michigan Agrieutlural College. 

Grant H. Slocum, Gleaner Temple, Detroit; publisher and 
secretary, The Gleaners. 

G. E. Prater, Jr., Paw Paw; manager. Farmers' Association, 
representing State of Michigan. 

M. Hartman, Grand Rapids ; agricultural and industrial agent, 
Grand Rapids and Indiana Railway. 

Maryland 

W. H. Manss, Baltimore ; development. 

Massachusetts 

Warren Dunham Foster, Boston; department editor. The 
Youth's Companion, homestead commissioner. 

F. K. Leatherbee, North Falmouth ; farmer. 

Wilfrid Wheeler, 136 State House, Boston ; secretary, Massa- 
chusetts State Board of Agriculture, representing the State of 
[Massachusetts. 

Ken yon L. Butterfield, Amherst; agricultural education, rep- 
resenting the State of Massachusetts, and Massachusetts Agri- 
cultural College. 

Alexander E. Cance, Massachusetts Agricultural College, Am- 
herst ; instructor, representing the State of Massachusetts. 



ACCREDITED DELEGATES 1915 CONFERENCE 525 

Minnesota 

J. C. Caldwell, Lakefield ; banker, representing Minnesota. 

H. E. Emerson, St. Paul; chief grain inspector, representing 
State of Minnesota. 

H. J. Farmer, Airlie; farmer, State Farmers' Grain Dealers' 
Association. 

L. J. Bricker, St. Paul; general freigiht agent, Northern Pa- 
cific Railway. 

D. E. WiLLARD, 313 Northern Pacific Railway Bldg., St. Paul ; 
development agent. 

J. M. Anderson, 209 Pioneer Bldg., St. Paul ; president, Equity 
Cooperative Exchange. 

Daniel A. Wallace, 51 E. 10th St., St. Paul ; editor, The 
Farmer. 

D. M. Frederickson, Phoenix Bldg., Muineapolis ; lands. 

E. Dana Durand, University of Minnesota, Mlinneapolis ; pro- 
fessor of agriculture and economics, representing the State of 
Minnesota, and the University of Minnesota. 

James A. Jeffrey, 901 Fidelity Bldg., Duluth ; land commis- 
sioner. 

E. M. TousLET, 3649 Park Avenue, Minneapolis ; editor and lec- 
turer on cooperation, Right Relationship League. 

Clayton L. Malaise, 518 Pioneer Bldg., St. Paul ; farm land 
investments, John Marshall Company. 

T. A. Hoverstad, Soo Building, Minneapolis ; a^icultural com- 
missioner, Soo Railway. 

Grant Van Sant, St. Paul ; farm mortgages. Van Sant Com- 
pany. 

Mississippi 

James A. Hearn, Hattisburg; agricultural agent, Queen and 
Crescent Route ; Queen and Crescent Route. 

Missouri 

Philip H. Hale, 3550 Vesta Ave., St. Louis ; editor. National 
Farmer and Stock Grower. 

R. W. Hockaday, 1526 Railway Exchange Bldg., St. Louis ; in- 
dustrial commissioner, M. K. & T. Ry. 

P. M. Jeffords, 1145 Aubert Ave., St. Louis ; M. K. & T. Ry. 

C. B. MiCHELSON, Frisco Bldg., St. Louis; marketing agent, 
Frisco lines. 



526 MARKETING AND FARM CREDITS 

Claeence a, Shamel, St. Josepii ; editor, profitable farming. 

Walter W. He.u), St. Josepli (U. S. A.) ; banker and farmer, 
representing Missouri Bankers' Association as chairman of agri- 
cultural commission and Interstate Agricultural Congress of St. 
Josepli, Missouri, as chaixman of Executive Committee. 

Samuel D. Groner, 403 College Ave., Columbia; teacher, Uni- 
versity of Missouri. 

Nebraska 

J. W. Wilson, Stromsburg; banker and farmer, representing 
Nebraska. 

George B. Wellock, United Farmers' Eural Credit Associa- 
tion. 

D. M. Mx^TiN, Norris City; farmer, State Farmers' Institute. 

C. J. Warner, Waverly, farmer; treasurer. Rural Credit As- 
sociation of Nebraska. 

Lucien Stebbins, North Platte ; farmer. 

R. V. McGrew, Naponee; president. United Farmers' Rural 
Credit Association of Nebraska. 

Walter G. Silver, 16th and Hamege Sts., Omaha ; vice presi- 
dent, City Trust Company. 

David Hanna, Wood Lake ; ranchman and banker. 

Nevada 

Fulton H. Sears, Fallon ; farmer. 

New Hampshire 

M^VRY W. Anderson, 824 S. Halsted St., farmer. 
Andrew L. Felker, Concord ; farmer, commissioner of agricul- 
ture, representing the State of New Hampshire. 

New Jersey 

Robert D. Kent, 150 Boulevard, Passaic ; banker. 

New Mexico 

B. C. Hernandez, Santa Fe; congressman at large to the 64tb. 
Congress, representing New Mexico. 



ACCREDITED DELEGATES 1915 CONFERENCE 527 

New York 

D. G. Mellor, 51 Broadway, New York ; manager, food prod- 
ucts department, Wells Fargo Express Company. 

Seth J. F. Bush, 732 Granite Bldg., Rochester; president and 
general manager, Eastern Fruit and Produce Exchange; horti- 
culturist. 

Marc W. Cole, Albion ; farmer, representing 25 unincorpor- 
ated cooperative societies in New York. 

G. N. Lauman, Cornell University, Ithaca ; on staff of Cornell 
University; representing the State of New York and Cornell 
University. 

T. S. "Welsh, 2605 Grand Central Terminal, New York ; agri- 
culturist, New York Central lines. 

Haviland H. Lukd, Hotel Albert, New York ; secretary. 

North Carolina 

William R. Camp, West Raleigh; chief, division of markets, 
representing State of North Carolina. 

North Dakota 

Frank L. McVey, University of North Dakota, University; 
president. University of North Dakota. 

Charles C. Connolly, 122 W. 7th St., Devils Lake ; farmer, 
representing the State of North Dakota. 

Frank Sanpord, Valley City ; farming and stock raising, rep- 
resenting the State of North Dakota. 

J. H. Worst, Gardner Hotel, Fargo ; president, agricultural 
college, North Dakota Agricultural College. 

James E. Boyle, University of North Dakota, Grand Forks; 
professor of economics and political science, University of North 
Dakota. 

H. L. BoLLEY, 1002 7th St. N., Fargo ; North Dakota Experi- 
ment Station, North Dakota Agricultural College. 

Charles Aofedt, Fordville ; real estate dealer, vice president, 
Farmers' and Merchants' State Bank of Fordville. 

Ohio 

Ralph R. Snow, Engineer's Bldg., Cleveland; lawj^er, Cleve- 
land Chamber of Commerce. 

F. Myers, Ashland ; manufacture of Myers pumps. 
Daniel Harpster, West Caro ; farmer. 



528 MARKETING AND FARM CREDITS 

J. H. Habpster, Millersburg ; farmer, Grange Holmes Com- 
pany. 

A. F. Bell, Union County, Indiana, College Comer; farmer, 
representing the State of Indiana. 

F. C. Johnson, Springfield; manufacturer, American Seed- 
ing Machine Company. 

J. T. Falconer, College of Agriculture, Columbus ; instructor. 

Paul C. Vogt, Ohio State University, Columbus; professor of 
rural economics. 

Arthur Emery, 605 W. Central Ave., Toledo ; statistician and 
merchandizer. 

E. S. Todd, 216 E. Church St., Oxford ; professor of economics, 
Miami University. 

L. B. Dunham, Cleveland Chamber of Commerce, Cleveland. 

Myron T. Herrick, Cleveland ; banker, former U. S. ambassa- 
dor to France. 

Oklahoma 

Carl Willl4.ms, Oklahoma City ; editor, Oklahoma farmers and 
stockmen. 

W. L. Carlyle, Morrill Hall, Stillwater ; dean of agriculture, 
director of experiment station ; Oklahoma Agricultural College. 

Oreg"on 

Hector MacPherson, 2750 Orchard St., Corvallis; teacher. 
The Oregon Agricultural College. 

Pennsylvania 

E. S. Bayard, Pittsburgh; The National Stockman & Farmer. 
W. H. Tomhave, 504 So. Allen St., State College ; professor of 
animal husbandry, Pennsylvania State College. 
GiPFORD PiNCHOT, Milf ord. Pike County ; forester. 

Rhode Island 

H. W. Tinkham, Warren ; farmer. 

Howard Edwards, Kingston; president, Rhode Isand State 
College. 

John S. Murdock, Providence ; lawyer. 



ACCREDITED DELEGATES 1915 CONFERENCE 529 



South Dakota 

Lewis Kilker, Britton; farmer, Fanners' Cooperative G-rain 
Company. 

C. L. Datson. Sioux Falls ; publisher, South. Dakota Farmer. 

Isaac Lincoln, Aberdeen ; farmer, representing Soutli Dakota. 

Charles A. Johnson, Fairfax ; banker and farmer. 

George W. Fischer, Redfield ; secretary, The North West Land 
& Home Bankers' Union. 

Tennessee 

A. J. Morgan, Knoxville ; dean, agricultural experiment sta- 
tion. 

J. H. S. Merone, Nashville ; treasurer, Nashville, Chattanooga 
& St. Louis Ry. ; Nashville, Chattanooga & St. Louis Ry. 

L. P. Bellah, Nashville ; general agent, Nashville, Chattanooga 
& St. Louis Ry. 

William A. Schoenfeld, University of Tennessee, Knoxville ; 
specialist in marketing and rural organizing, University of Ten- 
nessee, and United States Department of Agriculture. 

Texas 

Walter G. Verhalen, Marshall ; fruit grower. Standard Orch- 
ard Company. 

E. B. Spiller, p. 0. Box 3717, Fort Worth; secretary and 
general manager, Cattle Raisers' Association of Texas. 

LiNDLEY M. Keasbet, 43rd and Duval Sts., Austin ; professor, 
University of Texas. 

J. E. Farnsworth, Dallas ; vice president, Southwestern Tele- 
graph & Telephone Company. 

Nat Wetzel, 606 Frances Ave., Houston. 

Fred W. Davis, 1200 Blanco, Austin; commissioner of agri- 
culture, warehousing and marketing of Texts products. 

Clarence Ousley, College Station ; director of extension, Ag- 
ricultural and Mechanical College of Texas. 

Joseph E. Edmondson, Fort Worth; organizer, Farmers' 
Union of Texas. 

James E. Ferguson, Austin; governor of Texas, farmer, 
banker. 

Church Bartlet, Marlin. 

34— M. F. c. 



530 MARKETING AND FARM CREDITS 

H. C. POE. 

B. CUMMINGS. 

C. C. McDonald. 

F. H. Thaman, Alte Loina ; land development, Galveston 
County Business League. 

Vermont 

J. B. Wilbur, Manchester ; farmer. 

Virginia 

L. H. Barger, Shawsville ; farmer, representing the State of 
Virginia, 

G. W. KoNiER, Richmond ; commissioner of agriculture. 

Washington 

Clark G. Black, Pomeroy ; grain farmer, representing the 
State of Washington. 

West Virginia 

Herbert Quick, Berkeley Springs, West Virginia; farmer, 
writer. The Curtis Publications. 

C. A. Pierce, Kindswood ; fruit grower, West Virginia State 
Department of Agriculture. 

H. W. Williams, State Department of Agriculture, Charles- 
ton ; commissioner of agriculture. 

John Lee Coulter, Morgantown ; dean of College of Agri- 
cutlure, representing the State of West Virginia. 

Wisconsin 

M. S. Dudgeon, Madison ; librarian, Wisconsin Library Com- 
mission. 

W. L. Ames, Oregon; farmer. Farmers' National Congress. 

B. W. Utman, Hudson ; business and farming. 

H. E. Miles, Racine; National Association of Manufacturers. 

J. F. Dixon, Kilbourn ; general merchant. 

Alfred F. Schmidt, North Crandon ; farmer. North Crandon, 
Wisconsin, Grange No. 61. 



ACCREDITED DELEGATES 1915 CONFERENCE 531 

Henry Krumrey, (Senator), Plymouth; farmer, president, 
Sheboygan County Cheese Producers' Federation. 

G, A. ScHULTZ, Adell ; farmer, The Sheboygan County Cheese 
Producers' Federation. 

Gus. Brickbauer, Elkhart; farmer, The Sheboygan County 
Cheese Producers' Federation. 

R. B. Mel VEST, Glenbeulah; farmer, The Sheboygan County 
Cheese Producers ' Federation. 

George B. Robertson, Marinette, Farmers' Saving & Trust 
Company. 

Edward A. Fitzpatrick, 610 Leonard St., Madison ; secretary 
for the promotion of training for public service. 

J. W. Hicks, Prentice; lawyer, Wisconsin Potato Growers' 
Association. 

H. MuLBERGER^ Watcrtown ; vice president. Bank of Water- 
town, Wisconsin. 

J. B. McCready, Plymouth; cheese salesman, The Sheboygan 
County Cheese Producers' Federation. 

B. H. HiBBARD, 2235 HoUister, Madison ; agricultural econom- 
ics, University of Wisconsin. 

Charles McCarthy, Legislative Reference Library, Madison. 

John R. Commons, University of Wisconsin, Madison. 

Ellis Monroe, 644 Frances Street, Madison ; student. 

Charles W. Holman, Madison ; secretary, The National Con- 
ference on Marketing and Farm Credits. 

R. M. Rutledge, University of Wisconsin, Madison; assistant 
in agricultural economics, University of Wisconsin. 

J. R. Wheeler, Columbus; banker. Agricultural Commission 
of American Bankers' Association. 

I. M. Wright, Waukesha ; farmer. 

Wyoming 

Henry A. Knight, Laramie ; dean of agricultural college ; di- 
rector, experiment station, University of Wyoming. 
John B. Kendrick, Cheyenne ; governor. 

The United States at Large 

David Lubin, Rome, Italy; United States International In- 
stitute of Agriculture. 



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